Profit Taking, Dollar Ambush

Gold rode all the way up to $1245 today before profit taking began with a vengeance, driving it modestly down for the day. The dollar, continuing its mad rise, is accounting for all the negativity in the gold price.

Fundamentally, investors are looking for a safe haven not just from weakness in a certain sector or other market but from the uncertainty that a more systemic volatility brings. And that’s what we have… a sense of disorder in the marketplace.

Oil is leading that whirling dervish parade. WTI crude and Brent crude are coming closer to price parity. Both are sliding. Natural gas, due to seasonal demand, is enjoying something of a mini-renaissance. But the free fall of oil is casting a long shadow over equities.

Equities can’t find their footing in the new year. Today the Dow was up around 300 points for a while before turning around. Now it is down about 70 points. Bond yields are down while price is up, too.

So where is the money going? It’s trying to go to gold and silver, but there again, volatility is a threat. The yen has become a favored safe haven bet, with the dollar following, although not too closely. There is some positive energy in the platinum and palladium markets, but those are prey to industrial winds and thus are harder to use as a bell-weather for this discussion. All the base metals were down rather emphatically, implying that industrial demand is soft. Perhaps platinum and palladium are acting more like investment metals? We shall soon see.

Some of the money is beginning to trickle back to European equities. Asia was mixed.

We don’t propose or condone military action in the Middle East. We do predict it, though. There is too much chatter in informal circles to shun the thought right now. The beefed up security in the western world since the Charlie murders is a tip-of-the-iceberg response. And, one thing you can bet on – if the west becomes entangled in the Middle East once more, Vladimir Putin will seek to exploit the diversion.

Wishing youas always, good trading,