Video-August-13-2013-Archives-Daily-Show

In the last week and a half, two non-voting members have said the Fed is strongly considering tapering in September. One voting member, Charles Evans of the Chicago Fed, seems to be leaning toward December, but strongly. Today, Dennis Lockhart of the Atlanta Fed, also a non-voting member, said he was against tapering for now. One-two-three, altogether, scratch your heads. They certainly do needlessly add volatility.

Retail sales rose 0.2% in July. The pace slackened, led into the softness by a decline in auto sales. How that is good news for tapering advocates is beyond us. The hawks must have a broken wing. Or a broken record.

In Europe, there was also some good news on growth, but there is a storm on the horizon. Chances are growing that the UK will leave the EU. They are in an "all-but-currency" status in the group. This is over a battle concerning the EU's wanting to impose a tax on financial transactions. Of course London is Europe's financial capital, and if not equal with New York, certainly a close second for world financial capital. The Brits may be eccentric but they're not crazy.

The UK is Europe' s third largest economy and sixth largest in the world according to the IMF. The importance of the matter is that London (and New York) institutions wag the European finance dog. The Brits really do not like the domination of continental business by the Germans.

Gold is off today about 1%. Silver, however, held its ground and added a small but admirable gain, striking out on its own on a day when gold slipped. Silver traders and physical buyers are once more bringing into focus the white metal's importance in industry, especially autos and electronics. Physical buyers, many of whom have felt shut out of the gold market because of price, view it as a sort of "poor man's gold." (Although to make real money on silver you obviously can't be too poor.)

It should be noted that about 1/3rd of gold's drop today can be attributed to a stronger dollar, which in turn can be attributed to the tiny improvement in retails sales. Off in the distance, also pinching interest in gold, was a rise in bond yields issued by the U.S. government. The yield hit 2.7% as the face price of the bond fell.

Interestingly, the price of oil was up today, exiting its cha-cha with gold. The two commodities, being internationally traded in dollar denomination trades - and heavily traded at that - usually go up and down in fairly tight formation. We may be entering a phase where what is good for gold - slow growth and more stimulus - will be good for silver only if industrial activity really swings upward. We will then enter a period where that growth has to get over a hump and enter an inflationary run in order for both metals to thoroughly prosper.

Wishing you as always good trading,