Traders Say Yes, Dollar Says No

 Gold rose at the hands of traders and investors early in the day, until they eased up and a stronger dollar weighed on gold prices.

Investors were reflecting worry about the renewed tensions between Russia and the West over Ukraine, its "rebels" and signs of continued economic struggles in Japan. Japan, in fact, saw its economy contract for the second straight quarter, a decline brought on largely by a hefty increase in its national sales tax. On the other hand, Japan has loosened monetary policy in order to pump more yen into the system, a move that seems not yet to have taken hold.

As many of you know, Russian President Vladimir "Pouting" Putin left the G20 summit earlier than scheduled due to scalding attacks on his invasion of eastern Ukraine. The ruble fell again today but has struggled off of its lows. The handwriting is on the wall, however. The ruble, which had become a more or less respected international currency for some time once the old Russian bear recovered from communism's fall, has been in crisis for a year now. It is down 3.4% against the U.s dollar in the last week and down 30% for the year.

The dollar's strength against both euro and yen has been significant, if unremarkable. But the dollar has blotted up the uncertainty in developing "second-world" economies like Russia, Brazil and South Africa, all of which have seen their currencies grow much more volatile and have experienced sharp declines against the dollar.

To round out sentiment that is weighing on gold and pushing the dollar up, an expectation that the U.S. economy will continue to prosper has elicited new projections that interest rates in the world's largest economy will rise some time next year.

One would think the expectation is "baked in" to the price of gold. However, each time gold rises, bulls dominate thinking that says the American economy is just so-so. But the long-term read on the U.S. is that it is the strongest guy on the beach and 98-pound weaklings should beware.

One of those concerns about the U.S. being so-so surfaced today as U.S. industrial output unexpectedly fell, led by the auto sector. That could be structural or it could be cyclical insofar as the pool of Americans who might buy new cars keeps shrinking because so many already have done so. Couple that with stagnation in overseas markets and you're guaranteed to have lower auto sales. How the auto industry in the U.S. will find its way out of this conundrum may not be known till the year ends, holiday shopping is over and new models fill dealers' showrooms.

Overall, it is thought that new business spending could boost manufacturing in the U.S. across the board, excluding autos.

Regardless, it is shorter-term trends like the manufacturing weakness that keep gold bulls in business because it inclines them to believe the Fed is far from ready to raise interest rates.

EDITOR'S NOTE: Please be aware of this month's travel and holiday schedule, which will through November 30th. Thanksgiving falls within those days. Additionally, during that period, I will be in Indonesia, lecturing to key gold traders there. The time differential will make it necessary for me to send out the regular fundamentals (upper portion) of the newsletter at the usual time. The videos' timing may be different. You will receive special notification immediately following the release of a new video, which will appear on the website. Of course, trade alerts will not not change. I will monitor markets as usual and have all equipment necessary to produce videos. Thank you.

Wishing you as always, good trading,