Hot Words, Cool Actions

Hot Words, Cool Actions

Unexpectedly, Russia today pulled a very large contingent of its troops away from the Ukrainian border outside of the Crimean region.

But Comrade Stalin - oops - Comrade Putin kept up his bellicose tirade against certain forces inside Ukraine, the West in general, and the U.S. in particular. Of course he included the new government in Ukraine. All he forgot was to kick the dog on his way out of the press conference.

Thus is the nature of these games. Putin is a fool if he thinks he can cow the Ukrainians who just week before last tossed out one dictator and are most likely not in the mood to trade him for a foreign dictator like Putin.

This quieting of the situation allowed the bulls on Wall Street to roar a bit and take back all of yesterday's losses plus 0.75% more. The DAX and CAC 40 were up in Europe by almost 2.5% 

Of course, this helped drive down gold and oil, while stabilizing 10-year Treasury rates in the U.S. 

In other fundamental news, hedge funds have begun increasing their long gold contracts in the futures market quite dramatically. Our belief is that this is not a flash in the pan, but a positive trend for gold bulls regardless of how you trade gold.

There are a few reasons why the hedgies are doing this. Primary among them is the weakening economy of the U.S. and China, while Europe seems to be growing, then treading water, growing then treading water. This is not what people like to see since those trends play out in softer equities prices eventually.

We can also assume that the relatively high price of gold yesterday kept physical purchases to a minimum. Perhaps today's slide will encourage Asian buyers to jump back in to buy. 

We shall also see what the reaction to today's move from safe-haven to stocks means and whether prices will seem more attractive to bigger investors and traders.

And, though the pulse is quiet for now, the showdown in Ukraine is not 100% finished.