The Precious Pushback

The Precious Pushback

After two days that gave us a $20 pullback on 3-1/2-month-high prices, gold pushed back hard despite a rising dollar. Silver also came back around 1.3%.

Part of the reason is renewed physical demand in Asia where it seems the Chinese in both public and private sectors are catching gold fever, although still watching and buying dips carefully. 

We also believe that while the FOMC minutes were slightly hawkish, the factor is absolutely built in to the price of precious metals and that everyone is better off with tapering, including precious metals bulls.

"Gold is trading in a tight range," Commerzbank analyst Daniel Briesemann said. 

"We have seen some profit taking, but it's finding some support from the weak economic data we've had, so overall there's a balance here." 

Equities stuttered, then stabilized, then rose, and the safe-haven yen rose on Thursday after surveys showing factory activity slowing in China and stuttering in Europe underscored the fragility of the global economic recovery.

It may be that the Chinese are seeing gold as their best bet on safe-haven positioning (and for hedging should inflation walk in unannounced).

While the deaths in Ukraine are regrettable and need vigorous denouncement, for the moment the unrest there is playing more havoc with energy prices than having much of an effect on gold. We will have to wait to see what Russia will do, a move that will likely come after the Olympics end in Sochi.

Also forcing oil prices up is unrest in Venezuela. However, today once again demonstrated gold's uncoupling from oil as crude is virtually unchanged, hovering between small gains and small losses.

While it took until well into the afternoon session for gold and silver to rise substantially, it appears that the precious complex is more in tune with the equities' rise and fall than anything else.

As in so many aspects of markets, this is counterintuitive, or at least counter to conventional wisdom that says gold, particularly, moves in the opposite direction of stocks.