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While rising home prices and sales are strong economic barometers, industry experts pointed out that a major boom isn't likely to occur anytime soon. Mortgage prices have been rising this year, going up over one full percentage point since May, something that many observers agree will work with increasing prices to clip demand in the near future.

"Monthly sales are likely to be uneven in the months ahead from several market frictions," said the National Association of Realtor's (NAR) chief economist Lawrence Yun in a statement that seemed to forecast a temporary peak in the market. "Tight inventory is limiting choices in many areas, higher mortgage interest rates mean affordability isn't as favorable as it was, and restrictive mortgage lending standards are keeping some otherwise qualified buyers from completing a purchase."

"Listings also remained largely flat with a 0.4 percent increase in August. The inventory of homes for sale moved back to a 4.9 month supply from a 5-month supply." (A six-month supply is generally considered normal.)

"We are of the view that housing is continuing to grow, but we are not of the view that it is robust," said Fannie Mae's chief economist Douglas G. Duncan in an interview with the Los Angeles Times. He further speculated that many of this year's gains can be viewed as being a bounce-back from historic lows.

Essentially, this means that August's housing data will be far more predictive of the future than July's and will have a major influence on what the Fed thinks and does at its next meeting. Typically, a pick up in housing sales and a rise in prices foretells of better numbers in housing starts. Indeed, that has been happening, but we don't know the results that higher mortgage rates will produce now that they seem entrenched.

Obviously, the Fed's policies affect the price of gold and silver. Although, perhaps because most analysts, especially those with a conservative bent, have not truly grasped the magnitude of the recession's affect on housing, traditional problem-solving methodology is telling them that the FOMC must absolutely, positively, without fail begin tapering - next time, next time, next time. Those conservatives (we mean in outlook, not politically speaking) weigh on all sorts of economic issues.

It happens that conservative economics dominates the Republican Party in Congress. At this fragile stage of recovery - and make no mistake, it is fragile - the call for more budget cutting and using the debt ceiling as a cudgel is nothing short of a prescription for renewed disaster.

This combination of uncertainty factors is like a hippo sitting on all markets right now. Equities are down or flat as measured by the three major indexes. Gold and silver are barely holding their own. Crude and nat gas are down. In spite of better sentiment in Germany, European equities were only slightly higher. The U.S. 10-year treasury yield is down to 2.65%, about where it was in April and down from nearly 3% just a few weeks ago. That may bode well (eventually) for those who want lower mortgage rates.

Wishing you as always good trading,