Shakiness Helps Bulls

Shakiness Helps Bulls

Economic worries in the U.S., China, Japan and the E.U. have helped gold "confound the nonbelievers... as investors gain confidence in the current uptrend," analysts at TD Bank said in a note to clients. 

In fact, gold rose to a 16-week high on Tuesday, as weakening U.S. consumer confidence raised more doubts about the sustainability of the recovery.

The Conference Board's consumer confidence index dipped to 78.1 in February from 79.4 in the previous month. Indications of a slowdown in the U.S. economic recovery have multiplied in the last few weeks, with manufacturing and employment numbers coming in below expectations, sometimes starkly so.

We can add to crucial global economic softness the troubled situations in Ukraine and Venezuela. 

Europe will have to quickly come to the aid of the former Soviet republic in order to thwart a Russian assertion of quasi sovereignty over that nation. A debt default is a distinct possibility and there are few real available rescuers beyond Russia, the U.S., Europe and perhaps China. 

Of course, none may act directly but could do so through the IMF, the U.N. or other transnational agency.

Venezuela is also on the brink of civil war and it could be longer, bloodier and more costly to the world because of the South American country's position as a major provider of petroleum to the world. The bad blood has been building up there for a very long time. 

So, not only might Venezuela struggle with its debts, both public and private, but the flow of oil may diminish and drive prices up around the world. 

The stock markets' losses recently have been to the benefit of precious metals. And stock market gains seem also to have helped the prices head up. Very intriguing. 

It seems counterintuitive, but the threatened cut in American military outlays will probably end up helping defense stocks. The U.S. will rely more on technology and advanced machinery than on uniformed men and women. That will drive defense companies' equities higher at a time when many big durable-goods manufacturers are feeling a pinch. 

Finally, as we noted early last week, there comes a point where technical momentum becomes something like a fundamental factor - omnipresent and unavoidable.