Simple Conditions In Driver's Seat

You don't tug on superman's cape...
- Jim Croce, from "You Don't Mess Around With Jim"

Or should we say, "don't fight the feelin'?" There are a lot of ways to look at what now looks like the inevitability in gold's falling prices.

However, there are all sorts of caveats that had to be passed over for gold to hit its downward stride so completely. (Which is not a guarantee it will stay on a long-term down trend.)

In spite of the fact that the Fed has indicated it is on the same course it has been on for months and months, pundits and prognosticators seem not able to grasp what the message is that's been coming out of the FOMC meetings.

We have an analysis of that off-base viewpoint. People saying that the Fed must turn hawkish (now, last week, last month, last year - pick one) do not comprehend that the Fed's work is not done.

Regional and local banks are still not lending enough to small businesses. A "small business" can be a company with 100 employees and $120 million in sales. Or it can be a dry-cleaning storefront. It just can't be dominant nationally.

If you read all the commentary, all the minutes, all the views in the Fed releases, you'll see that this problem is a consistent theme. Also, when will traders get it straight that non-FOMC members do not vote on rate policy nor on tapering policy? So, curmudgeonly hawks bubble and boil every month right around FOMC meeting time (which is coming up). Sound and fury, signifying nothing.

The trouble with the U.S. and the world economy is too little credit, not too much. That's also the problem for gold and silver. No credit, spending stays low, and there is no inflation or very little.

No economy in history has ever cut its way out of recession or depression. You can take an "organic" view of spending that relies more on the private sector's activities, or you can take a "kinetic" view in which government spends more to stimulate. But spend you must if you are to recover.

Banks are sitting on close to $4 trillion in cash. It is now common knowledge that big corporations are flush with cash. No one wants to part with their bucks.

The upsetting thing is that it is due to the Fed's policies that so much cash is locked up.

If you want to see a bull market in precious metals, you better write to the Fed and tell them to start forcing banks to lend.

The dollar is down marginally against the euro and the pound, up marginally on the yen. Oil, after recovering yesterday, is again slipping. Gold and crude seem to have reunited in their directional habits.

U.S. equities are down between 0.40% and 0.60%, depending on the exchange. Bond pricing is down, yield is up.

Other commodities are hurting as well. Nine of the fourteen ag products are down for the week somewhat significantly. Livestock, which has seen an enormous run-up due to drought in the West and South is finally hitting a slow patch in pricing.

Inflation begins somewhere. Either through scarcity, demand, or market manipulation.

None of those forces seem to be at work.

As always, wishing you good trading,