Once Around The Landing Field

Once Around The Landing Field

The Italians have a great expression for messing around, not really making any progress: fare un giro (far-ay oon jeer-o). A literal translation means to make a turn. In America we call it "puttering"; in Britain, "messing about."

That's what gold did today, rising from the runway on a lazy day and making big circles, blown one way by Janet Yellen's pro forma day in front of the Senate, by a rise in weekly unemployment claims, and by a softening dollar. Then it was blown the other way by an IMF statement that said it would come to some accommodation to support Ukraine in its financial travails.

Also today, the Commerce Department said that U.S. durable goods orders declined by a seasonally adjusted 1% last month, less than expectations for a 1.5% drop. That had a neutral effect on the price of gold.

Here is an excerpt from Yellen's comments before the Senate Banking Committee, which contains the essence of what she was trying to convey:

"In the weeks and months ahead, my colleagues and I will be attentive to signals that indicate whether the recovery is progressing in line with our earlier expectations," she added.

The last sentence is designed to tell us that she's not sure about the next envisioned round of tapering. If the slowdown is to be blamed disproportionately on bad weather, tapering will continue. If it is due to more fundamental reasons like tight credit or further bank shenanigans, tapering may be suspended for the nonce.

She reiterated that tapering is not on a preset course and cautioned against jumping to any conclusions regarding weather-related softness. 

We are of the mind that anything in the economy that is related to natural disasters is stimulative. Most retail can be hurt but there are compensatory spending surges in such areas as fuel, equipment, overtime for municipal and other workers, and of course, hot chocolate. 

Eventually, the bills will have to be paid but for now spending is about the same although it's shifted from one sector to others. For instance, in apparel, spring wear is taking an enormous hit. Just as an aside, International Falls, MN, is expected to experience -21F degrees tonight. New York City should see +12F. If there were such markets, we'd be shorting bikinis and going long on electric blankets.

The best news for bulls is that gold is steady and the small sell-off yesterday seems to have been stopped in its tracks for now. Little sister silver is following in the same tracks.

Continued uncertainty in Ukraine, Venezuela and Thailand should be considered favorable to bullish sentiment.