The Push and The Pull

Early in the day, U.S. economic data drove stocks higher and gold lower. At 5 o'clock EDT, gold is now slightly better than even on the day.

News that new factory orders in June increased by 1.1% primarily drove the trading. Additionally, and perhaps more importantly, The Institute for Supply Management's services index rose to 58.7 last month up from June's 56.0 and the highest level since December 2005. (A number above 50 indicates expansion.) Let us do the math - that's the highest reading in 8-1/2 years. That's long before the Great Recession, that's when people were still singing "Happy Days Are Here Again."

An aside: conversely, China's services sector is shrinking, even by the official "cooked" numbers.

The data drove the dollar higher against a basket of currencies. That hurt gold, which is up $3.70 in normal trading.

The twin U.S. data took equities higher but at 3PM in New York, the three major indices were off around 1% each.

What happened?

According to a NATO official, Russia now has 20,000 troops stationed "in an area along the entire border with eastern Ukraine." The buildup nearly doubles the troop deployment of the last few weeks by adding 8,000 more forces to 12,000 already there, the official said.

This move comes on the heels of official comments from Ukraine defense officials that depicted their operations as almost finished, meaning the eastern area is close to being pacified. For the moment.

Comrade Putin poured a little gasoline on the fire regarding sanctions.

"Political instruments for putting pressure on the economy are inadmissible, this is against all norms and rules. In this respect, the Russian government has already come forward with an array of retaliatory measures to the so-called sanctions imposed by certain states," said Putin.

The fact of the matter is that the West can hurt Russia terribly. Russia could make the symbolic suicide run against Europe and stop selling it gas, but Russia would have less than a year's worth of foreign reserves, which in any case would not be readily convertible in a crisis. How long could Russia survive without the flow of cash from oil purchases? Months, maybe - six at the outside.

Yes, Europe would suffer, but it has been through far worse and conservation is probably a long-term strategy anyway.

There was better news from Gaza. The Israelis say they are wrapping up their offensive. Yet, as most of us realize, the underlying causes of tension have not been treated with. Essentially we have two sides, one of which is sworn to annihilate the other (Israel), and Israel pledging to do anything and everything to stop that. So, barbarity meets barbarity, resolution recedes. Regardless of which way you look at it, for the moment, it is not affecting gold prices.

As a broader measure of what's going on in the world, the CBOE VIX (volatility gauge) rose by 10% today. That is always good for gold, although bulls are facing headwinds because of the strength of the U.S. economy.

Silver has been behaving more like an industrial commodity, and the fall in demand in China - seen across the base metals complex recently - is governing the gray metal.

As always, wishing you good trading,