What If To The 5th Power

Big "what-ifs" are on everyone's mind today as we await the initial news release from the Fed's Open Market Committee meeting.

Additionally, even though there was some soft data from the U.S. regarding orders for durable goods, consumer sentiment, the thing that counts most as we go into the holiday buying season, was up, up, up.

But, the soft data did drive the dollar down and we know that means a push upward for gold.

The Fed will probably end QE3 after today and tomorrow's meeting. That doesn't mean, though that they will not concoct another strategy to make sure the U.S. economy keeps rolling. And, as we have said a number of times over the last week, the situation in Europe looks fairly bleak as they continue to dither due to bureaucratic snafus over who, what, when and why concerning their own quantitative easing. The Europeans are really far too important a player to be acting this way.

But what if the Europeans continue to depend on U.S. action and fail to act? What if the Fed says "tough beans," we're out of the QE business?

On top of that, there is now broadening worry that China has been literally cooking the books regarding their portrayal of the size of their economy and the speed with which it is growing. This relates to imports and exports moving through Hong Kong and - get this - falsified invoicing and records of money transfers. Maybe the kids on Hong Kong's street are more right on than we've given them credit for?

What if real deflation occurs in Europe as it already has in some of the constituent countries of the union? And, what if China is growing at only 3% or even less? We actually don't have a clue and big investors are starting to panic. Maybe China will just end up to be a whale-size Argentina.

As to the U.S., many times we have pointed out the abject failure of Congress and the President to work out fiscal policies that will help the world's largest economy grow stronger. The Republicans may take the Senate from the Democrats. That's still in what-if land. But if they do, they will then be forced to actually govern.

What if they propose more tax credits, tac cuts, and spending cuts? What if the President says ix-nay and wants direct infrastructure investment? Will the U.S. just have a different kind of gridlock?

Oil seems to have stopped its downward slide (avalanche, really) but there are more and more cool heads asking what if it falls to the $70 range? And, isn't it the height of irony to realize that, contrary to most theories, the price of energy is falling as the world's economies are recovering? But, the falling price comes with a cost. In the U.S., Canada, Russia, the Middle East and parts of Latin America, money will be scarcer, jobs will be fewer.

What if all those bad things happened and none of the good? What if gold behaved the way it should - like a safe haven from the storms of economic uncertainty?

Wishing you as always, good trading,