Step Into The Magic Oscillator

The Markets must have four stomachs. They chew, re-chew, re-digest and finally – well, maybe finally – settle on a group-think opinion.

Today that opinion says that the FOMC statement is good for stocks, good for America (cue the “Star Spangled Banner”), good for the world, for everything right and just in the universe. But just wait till tomorrow.

Again, just to confound us, gold is up along with the equities markets. Oil, however, continues falling into the deepest well known to mankind. The markets seem out of synch with the traditional way they usually operate. As we know, usually gold and oil move together.

But, there is some news in the physical markets that is buoying the yellow precious metal.

India is going to further raise import quotas on gold. Production levels of gold are lowering. And, some, but not all, ETF’s are stocking up again. Some analysts are saying there is increasing haven demand for gold. But by whom?

All three stock markets in the U.S. are up by over 2% today. The Dow is up 377 points to frame the movement of money in that format. The U.S. 10-year bond’s yield is up slightly. And the dollar is up against the euro and yen, although down against the GB pound. (The pound benefited as the Swiss took interest rates to zero. Either the pound or the Swiss franc serve as a European hedge against the euro.)

So, there is a missing piece of the puzzle.

That puzzle piece will partially be made up of a reinterpretation of the Fed statement made yesterday. Another part of the puzzle piece is the movement of money from oil to gold in countries where it is difficult to hide assets an investor might have in equities. Gold is, above all, portable and untouchable, almost invisible in many cases.

Regardless, there is a huge problem for gold on the fundamentals horizon. If, as more reports are asserting, Russia’s currency reserves are about half of what previous reports had stated, Russia will look to sell off big chunks of its gold holdings. Russia holds about 1,100 tons of gold. It used to be said that it represented 10% of its foreign exchange reserves. Now it means that gold accounts for at least 20%.

If Russia begins selling gold, we will have to take heed. Wishing you as always, good trading,