Tailwinds For Bulls

Tailwinds For Bulls

A combination of factors is helping gold make some headway as the week begins.

The unrest in Ukraine and to a lesser extent in Venezuela is raising the specter of defaults in the bond and direct investment markets. 

The Ukraine government  just ousted by popular uprising was counting on a $15 billion bailout from the Russians who have now put that "coverage" on hold. (Or perhaps they spent all the money in the national till on the Sochi Olympics?) We're of a mind that the E.U. and the U.S. will be able to pull together some sort of package to help the Ukrainians in return for Kiev's not acting too belligerently toward the Russian bear. Then the Russians can resume a more businesslike involvement with Ukraine and stop mucking around with their political process. But, until that scenario plays out, the bond markets will be on tenterhooks.

Venezuela is a bit of a different story because it has more direct foreign investment in its oil industry beyond bonds. Nevertheless, there is money at risk. And, because of sentiments that have been building for well over a decade, if the conflict between the far left and the center can't be contained, the country is looking at a real civil war and not just civil strife as in the Ukraine.

Given the two situations, it's no wonder gold is seeing some safe-haven action.

However, keep in mind that higher prices will push physical buyers to the sideline, and to some extent that kind of purchasing has been helping keep a floor under gold. Whether it does at 1340 to 1400 is an unknown. 

Perhaps some buyers will see gold as having created a new normal at approximately the support levels we're seeing now.

Poor economic news on housing starts in China also helped propel gold higher today, with the Chinese among the biggest players. Always hard to draw a bead on the big Asian country but from what is filtering out, it seems the man-on-the-street and the old auntie alike are beginning to lose faith in the possibility for continued crazy growth there.

Investors may already be girding their loins for bad news from the U.S. economic front due out this week. You wouldn't know it from the equities markets in the U.S. and Europe, though. The S&P is just below its record highs. 

Since Barack Obama was sworn in in 2009, the Dow has gone from 7,949 to 16,207 at this moment. 

This week's reports will focus on GDP data, durable goods orders and consumer confidence reports. 

Friday also marks the end of February trading, so we will see some bearish action due to suqaring of the books, and those who want a fresh start come March.