Momentum Takes Over

Momentum Takes Over

The perverse, marauding winter weather continued along the East Coast of the U.S. today. The net effect was that the folks in Washington could not get into any mischief, so the conditions that were set up by Fed chairwoman Yellen's testimony in front of the House Tuesday has been setting the tone for gold and silver.

The gold rally that is pushing prices above 1300 is particularly dazzling since the equities markets have been rising at the same time. There is evidently plenty of money that is washing in because of the slippage in developing, or second-world economies.

We suppose that some of the precious metals bets have come on the hopes that recent weaker U.S. economic data will steer the Fed away from its appointed rounds of tapering. It's highly doubtful it will. And it's not necessarily something precious bulls want, anyway.

Today, soft U.S. retail sales helped get the QE tapering doves flapping, but the figures have to be considered somewhat of an aberration given that one of the richest, most actively consumerist sections of the nation has been slapped about by extra frigid weather and plenty of snow and ice. That keeps many people from spending. We may not see a full retail recovery from the weather until well into March. It's hard to think about your spring wardrobe when you're knee deep in snow and ankle deep in slush. And seriously... watching today's wether report... would you buy a car in this weather? Best to wait until the storms have passed and take advantage of hulking excess inventories, eh?

Some analysts are already saying the weather of the last 45 days has cost the economy $70 billion, a rate of roughly 1.5 billion per day.

Goldman Sachs is saying that first-quarter GDP growth is now tracking at a 1.9 percent pace, from 2.3 percent previously and that there is something bigger than the weather going on. What it is Goldman did not say except to hint at the ominous.

The early struggles in the equities markets can be assigned to the bad weather in New York, fewer senior traders and decision-makers participating in the game. That would result in thinner trading and thus more volatility. 

One thing is for certain. The weaker data resulted in a weaker dollar, which in turn has helped the $10+ rise in gold today.

Percentage-wise, silver is up significantly more than gold today, also on the momentum of the weaker dollar. 

China remains a question mark. While auto sales there for the 12 months ending January 31, 2014, hit a record, the rate of growth fell 7% for the month of January. 

As Tom Petty wrote:  You believe what you wanna believe, So you don't have to live like a refugee...