Turning On A Dime

How quickly sentiment changes!

Russia can't seem to resist meddling in Ukraine. The world looks on in revulsion, the markets look on in fear that produces volatility. Aside from fierce fighting around the eastern Ukraine city of Donetsk, Putin is having his people prepare a list of agricultural products from the EU and the US that will be banned from importation. Wine is not on the list. Then again, neither is baby food. Both for humanitarian reasons, no doubt.

On top of the Ukrainian instability, the counter-insurgency effort by the Iraqi government took a new turn toward seriousness when an airstrike killed 50 radicals in Mosul.

Equities were off in Asia and Europe, and are only marginally higher in the U.S. An upward revision of U.S. 2nd quarter growth and a rise in the forecast for 3rd quarter growth did not impress the stock traders. Other good news in the world's largest economy that did not impress told us that the U.S. trade deficit shrank on smaller energy imports. That is giving rise to more talk that America is headed for energy independence or something closely resembling it. Energy imports make up about 2/3rds of the imbalance, most of which is with Canada and Mexico.

Wall Street is uncertain concerning what's going on in Ukraine, but all of a sudden there are renewed fears about weakness in the overall European  economy.

Leading the parade of worry is Italy, Europe's third largest economy. That country slipped into recession in the second quarter.

The banking crisis in Portugal once again revealed weaknesses in the European banking system and the stimulus by the European Central Bank is seen as too little, too late.

At least 18 months ago we at The Gold Forecast identified this failure-to-stimulate problem for Europe, which, because of its political fragmentation, has a harder time reaching banking consensus than the U.S., China and other major economies.

The irrational fear of the 1920's Weimar Republic inflation has to be abandoned in the contemporary world. The hyperinflation that occurred almost 90 years ago now. it's a long way from 1.1% inflation to 40,000% inflation. Hello, Germany?

As might be expected, along with gold and silver, other safe havens garnered a lot of attention and money today. Prices on U.S. Treasuries soared and yields fell. The Japanese yen also attracted strong interest.

For those of you watching the other precious metals, palladium and platinum both rebounded in price today. Russia is the world's biggest exporter of the former and the second largest exporter of the latter.

As always, wishing you good trading,