Mild Rise In Gold Ignores Soros Moves As Fed Minutes Loom

While we await the Fed minutes – fingernail-biting positions, everyone – we are faced with a boatload of conflicting information, currents and crosscurrents.

Crude oil, (the American, West Texas Intermediate kind), hit a seven-month high due to an outage in Nigeria, renewed wildfire pressure in Alberta province in Canada, and a prediction on stockpiles that seems to imply reserves are going to move lower. We are skeptical of the long-term implications of these situations. We also have to remain aware that demand will slacken as distillate refineries cut back on purchases for maintenance in June.

Despite the record highs in oil, investors took U.S. equities to the woodshed and administered a whipping. The general sense is that investors, hedge funds, banks and insurance companies had tended to overestimate the probability of a Federal Reserve interest rate hike.

We can’t fully blame them, although it is fairly obvious that the U.S. economy, although it is stronger than other areas, essentially is close to stalling. Growth has been steady, if lackluster.

Except for ideological reasons, there seems to be no fresh, strong evidence of either inflation, wage pressure or even much lower unemployment. So… why would the Fed raise rates, except to satisfy the element on the board that says we need higher rates so they can be lowered in case of a new catastrophe.

Surprisingly gold and silver are not drawing as much strength as one would think from the fairly serious losses in equities today. Silver is looking better than gold on the session but drops of well more than 1.00% in U.S. stocks haven’t truly inspired the precious metals traders.

Doubly confounding is the fact that market mover George Soros in a 13F filing yesterday has sold about 37% of his group’s long positions and put that money into… gold bullion and producer Barrick Gold. Yet we have only a blip up on the gold chart for today.

It is important to note that 13 filings can be old news by the time they filter into the mainstream’s perception. That means Soros may have already switched out of the aforementioned investments. That isn’t the case. Soros has been harping fairly heavily on China’s shaky prospects and he is neutral on the overall world economy.

The U.S. dollar was up against the euro for parts of the session but has been losing steam as the afternoon wears on. The buck is still up again the yen. The two pairs – dollar/yen and dollar/euro have been trading quite autonomously of one another recently.

The yield on the 10-year U.S. Treasury bond is a bit sideways today and has been staying inside a range although it is being traded briskly.

Two news items to close:

1. The VIX on the CBOE is up over 8.00% today, touching 16 briefly before backing off today. Keep an eye peeled.
2. The FOMC minutes will be released tomorrow (Wednesday) at 2PM Eastern Time.

Wishing you as always, good trading,