Gold Triumphing As Multiple Markets Reach an Inflection Point

West Texas Crude Oil flirted with $26.00 per barrel today before recovering toward $27.00. The drop was more important than yet another rumor – this time out of the Emirates – that OPEC was close to striking a deal to throttle back production and thus raise prices.

We believe that it will be quite some time before the excess production is flushed out of the market system. Nevertheless, the price of oil battered equities again today.

In turn, that helped gold prices rise at one point to $1260 per ounce. The leading precious metal has since backed off and is trading around $1248, up over $53.00 for the day. That is up 4.50% in percentage terms.

Silver is up 3.60%. Platinum also turned in a fine performance on the day although palladium remains a sluggish problem child.

Some of the rocket fuel propelling the meteoric rise in gold is a softening dollar, but it is the growing concern around the world about global economic weakness that is the true not-so-secret ingredient in the formula.

You know there is a crazy amount of volatility when the VIX – the floor traded indicator of volatility – is itself experiencing wild swings. So even uncertainty has become uncertain. No, wait, we’re certain. No we are not.

The VIX vaulted above 30, a fairly extreme number indicating high volatility before it plunged to 26.75. It has since centered itself around 28.50. (The higher the number, the more volatile traders think all markets will be in the near term.)

The U.S. dollar – another good indicator of volatility – is down one more time today against the euro, off about one third of one percent. Swings in the dollar, rather than how weak or strong it is against a basket of currencies, denote a higher degree of volatility.

The greenback is also off against the yen by almost 1.00%.

The dollar is weakening as holders cash in to cover shorts in almost any market and recently, to buy large quantities of gold.

The German and Japanese 10-year bonds are yielding just a touch more than zero at the moment. The U.S. Treasury bond is also down dramatically, (around 1.6%), but man, many traders are looking at the stability of bonds as a safe haven beyond gold. The lower the bond’s yield, the higher is the face price of a bond that an investor pays.

The Hong Kong index was off 3.85% and the Nikkei was down 2.3%. Worries there include the Asian export sector and big banks. The weakening dollar speaks to the export worries. The banking problems seem to be spanning the globe and, as we circle around a bit, it is oil that has so many institutions shaking in their boots.

Big lenders and underwriters of new oil-related businesses have a lot of exposure out there. The rock-bottom prices of oil are driving a lot of those borrowers and new equity-financed companies into bankruptcy.

As this article explains, many of the oil companies up and down the production chain, based their valuations on oil that was $90 or higher. Then it was $65 per barrel… those chickens are coming home to roost and they have very sharp talons.

http://www.wibw.com/content/news/US-oil-bankruptcies-spike-379-368477941...

Wishing you as always, good trading,