Indecision Works Against Gold

A recovery of the greenback has been inevitable for some time. Whether we're going to experience a full-blown reversal remains to be seen, however. Today, we saw the dollar rise but then back off of its gains. 

 

In regular trading, conflicting cross-currents pushed and pulled on the minds of investors and traders. On one hand, they are still keeping an eye on a potential slowdown. The churning in the stock markets in New York came to a somewhat abrupt end when the Labor Department announced that filings for new weekly unemployment claims reached a nearly 14-year low at 264K.

 

That would have been enough unto itself, but industrial production rose 1% in September versus the 0.40% consensus figure. The housing industry put a damper on the happy fizzies party, though, with new home builders showing less confidence after August's soaring gains in outlook. But outlooks are only outlooks. Hard numbers are better. 

 

Crude and Brent futures were both up, recovering on a short-term expiration date play that is largely technical and bound to be short lived. Why? U.S. inventories showed an 8.9 million barrel increase while a rise of only 2.8 million barrels was expected. U.S. inventories are in the 370 million barrel range at the moment. That's a lot of oil. 

 

As might be expected, yields on the 10-year T-bill rose and the face price of the bond fell, although the moves were far short of dramatic.

 

The dollar is fading as the afternoon wears on, although it is not impacting gold (and certainly not silver). Regular trading is staying in step at just after 5 o'clock, so gold remains off just under two dollars.

 

St. Louis Fed President James Bullard, a notorious hawk, looks like he found some soft white feathers and turned into a dove. He's worried about the slowdown in Europe. He's worried about ending the last of QE3. Of course, he's a non-voting member of the FOMC this go-round, but that didn't stop his words from roiling the market. Gold is especially sensitive to this side talk.

 

We're wondering if there is an equities rally lurking behind the thick forest of worry. 

 

As always, wishing you good trading,