A Small Rally

Allegedly, physical demand in China has sparked the mini-mini-rally we are experiencing in gold, although that is tough to swallow given that prices have been low for some time. It might be that buyers in China are going on a bit of end-of-year spree. Nonetheless, they can't make up for the decline in physical purchases in India and the lukewarm interest in gold jewelry in the Western World.

It seems, rather, that there is some money - as light as the trading volume is - that is taking a new look at gold.

What we find particularly interesting at this time of year is that the mini-mini has come on the heels of the Fed's first tranche of tapering; lower unemployment claims in the U.S.; a surge in durable goods orders; and a jump in U.S. and European retail numbers. The American economy, in particular, seems to be building up a head of steam.

One might speculate that we are seeing a return to "normal," or at least a "new normal." We hope, along with other gold bulls, that the neurotic Fed-watching period is over. With tapering, life went on. With more tapering, even if it comes as soon as January, life will, indeed go on.

Our chief worry is the absence of inflation.

The Romans had a god named Janus, whose statues depict him as having two faces (not in the sense of double dealing) because he looked back at the old year and forward to the new. The month of January is named for him.

We are at that quiet time of the year when we reflect on what has happened and what might happen. We know there was a big drop in gold prices in 2013. Some big idea thinking says it is because gold had flown too high. We come down on the edge of that camp. Maybe gold was overbought. We also are becoming interested in the big idea that gold now may be oversold. When the traders will realize it, only time will tell.  

As always, wishing you good trading,