The Report Card Is Due Tomorrow

The main force driving gold prices today is a peripheral fundamental, namely the strength in the dollar. Dollar goes up, gold goes down.

There are a couple of reasons why this is happening and it really has little to do with the dollar but more with the euro, which is the currency relationship through which we view gold buying and selling activities.

The euro weakened today (as did the GB pound). Mario Draghi, president of the ECB - European Central Bank - is beginning to prepare the zone for a rate cut, a quantitative easing program, or both. When interest rates in a country or association of countries decline, its curenncy goes down in tandem. The opposite is also true.

The dollar was up against the euro today about 0.35%. Gold is down about 0.30%.

Helping with the higher dollar/lower gold scenario was a bit of economic news out of the U.S.

The U.S. service sector grew in March, according to the Institute for Supply Management's non-manufacturing index. Some say this will add fuel to the fire of the Fed's raising interest rates.

That may well be true, but hold your horses for a minute. How high does anyone think the Fed will actually raise rates over the course of the year after they (potentially) begin the boost?

1%, perhaps? 2%? It won't be terribly drastic, because in relatively short order the American central bank has to start watching out for cyclical pressures that can hurt growth. For instance, what will happen once all the older cars in the hands of private hands - consumers - are replaced?

Right now the auto business is riding high on the release of pent-up demand, the hangover from the recession. And, housing hasn't caught fire and when it softens... well... you get the picture.

Although we can't expect it, a little rationality in the market response to such fears ought to make an appearance.

As always, wishing you good trading,