A Reason To Believe?

After touching 1318 earlier in the day, gold has settled back in afternoon trading to only a modest gain. Curtailing some of gold's head of steam was a stronger dollar.

The tensions in Ukraine, and to a lesser extent in Iraq, are keeping gold prices stronger than they might otherwise be in the calm, windless seas of late summer.

The Ukrainians are right in being suspicious of Russian intentions regarding aid to the devastated eastern region of Ukraine. Without resurrecting the awful events of the 20th century, let us stop to say that every time the issue of ethnic purity or ethnic groups living abroad has come to the fore, people have suffered immeasurably.

We know that Hitler's death camps killed upwards of 10 million people. We know that Hitler's biting off of chunks of other countries where ethnic Germans lived essentially started WWII.

We also know the terrible repercussions in Bosnia, those in Rwanda and we witness them today in the western reaches of countries taken over by Chinese central authorities.

If Russia were truly looking to reenter normally conducted international society, they would hop on the blower to the Red Cross right now and ask them to oversee or at least give their blessing to the cargoes intended for eastern Ukraine.

Iraq is an even trickier situation for the rest of the world.

The factions - political, ethnic, religious, social and free-lancing foreigners - will be very difficult to untangle. Iraq is the second largest OPEC oil-producing country. And, while for the moment oil prices are under control, if shortages develop, Iraq's oil would be sorely missed, especially in Europe and Asia.

Nevertheless, due to large-than-projected inventories, crude prices declined today.

All major equities indexes in the U.S. and Europe were down today. In Asia, the Nikkei was up, but Shanghai was down. This also helped gold slightly.

There was news that should have affected gold more acutely but did not.

Existing home sales in the U.S. fell about 4.5% in the second quarter of this year from the same period in 2013. Moreover, the median existing home price increased only 4.4% in the second quarter year over year to $212,400, a significantly smaller gain than the 8.3% annual jump seen in the first quarter of 2014.

Those kinds of numbers are exactly the kind that will give the Fed pause when considering raising interest rates. They don't want to see a 1/2-point rise in baseline rates translate to a 2-point rise in consumer mortgage rates. That could cause a real slowdown.

But there are blithe spirits abroad in the land and they don't believe the Fed is being truthful when they say rates will not rise until well into '15.

If traders were to embrace the idea, gold would get a significant boost. We're in a mixed message climate for gold at the moment.

As always, wishing you good trading,