Return From The Polar Vortex

When the U.S. was locked into a severe winter from December through February (heck, the East Coast is actually getting hammered again today) economic activity was squelched. All the things you can imagine working toward that suppression of activity indeed went on.

Poor consumer consumption, bad transportation problems, the flow of raw materials and a spike in demand for heating oil but a decline in gasoline use typified the weather-related slump. The constant tattoo of weather reports didn't help, either. It actually made people in sunny climes cut their spending!

Perhaps anticipating a much bigger spring season in the economy, factories in the U.S. ramped up and you can almost hear the song "Happy Days Are Here Again" being whistled on the street.

Factory production increased a beefy 0.8 percent last month, the largest increase since August of 2013, the Fed reported. That almost counterbalanced January's 0.9 percent decline, which was the sharpest drop since May 2009. The rise in February was better than the 0.2 percent rise anticipated by economists polled by Reuters.

It was the better-than-predicted feature of the report that drove equities investors wild and is partially what stepped on gold and silver - for the moment.

The fact that no one was burned to a nuclear crisp over the weekend seems to have also pushed the precious metals sector down. But don't bet the dacha that the Ukrainian crisis is over. Putin smells bad, and as soon as his popularity tanks again, look for him to pull another stunt.

Although various right wing Senators have publicly taken President Obama to task for being "weak," from all trustworthy reports, it was Obama who reamed Putin out today. The U.S. and Russia both have been hurt by this affair, but, while neither country can afford a heavy remilitarization program, if it happens, the U.S. is in better shape to prevail. And anyone, from either party, who is making fast and loose with war talk ought to zipper it.

The FOMC meeting tomorrow is most likely of little consequence for gold and silver traders. (Silver traders need to keep watch on China and its struggling economy.)

The Fed is on track to end QE3 by the close of 2014. Little will distract the central bank from its appointed rounds. Underlying conditions are strengthening, if rather slowly. Balance sheets continue to strengthen. Inflation is more than contained. In fact, it's way too low for a healthy economy.

The word is that we will begin to hear more about clearly communicated forward guidance, so financial institutions, companies and individuals are able to make better decisions regarding money.

This is a very good thing for gold. All we need now is a pinch of inflation to set the gold price on fire.  

As always, wishing you good trading,