When Is A Push, A Shove?

When Is A Push, A Shove?

There are indicators and then there are indicators. 

Durable goods fell 4.3% in December when they were expected by experts to rise almost 2%. That sent the Henny-Penny types scurrying about, selling equities and buying gold. That is, until, they saw that their previous research was neither due nor diligent. It turns out that this is the first report in which government statistics reflected an averaging of new aircraft orders instead of a more volatile actual month-to-month count. So, it (only) appeared that aircraft orders fell when they didn't at all. 

"We had expected the overall value of commercial aircraft orders to be unchanged, but it turns out the adjusted figures show a 17.5% decline," said Paul Ashworth, chief U.S. economist at Capital Economics. Good to know we're in capable hands, eh?

Next, consumer sentiment rose to a greater-than-anticipated level of 80.7 in January, a hefty boost from December's 77.2 on the index. That revelation sent gold back down. 

Gold highs today thus far were around 1262 and lows around 1248. Currently they are around 1254 (4:30 PM NY time).

The general sense of the fundamentals landscape is that many traders of every stripe are laying low until word comes from the FOMC meeting tomorrow. Analysts and traders, and more casual speculators from Asia, will be looking for signals that might indicate how Janet Yellen will lead when she takes over as Fed chief in February.

Positions before the release of news tomorrow afternoon are likely to be small, no matter what the trading instrument. 

We are, regardless of Yellen, a long way from a cessation of QE3, and even farther away from a tightening of monetary policy. The former may take another year; the latter may take 18 months.

There are also reports from many gold-producing regions that tell us the price of gold has fallen far enough that production will slow, or in some mining centers even stop. The costs of production from exploration/discovery to shovels in the ground to finished refined product are becoming a real impediment to creating "new" gold.

The slowdown in the pipeline may push prices up, although it won't be a major shove.

Additionally, there is a major factor pushing down gold: the strength of the dollar. While the U.S. is starting to slow quantitative easing, Europe and China are ramping their own pans up again. 

But the American currency will wind itself slowly upwards, and not vault into the sky like the cow that jumped over the moon. Its strength will exert pressure along the lines of a steady drip, drip, drip on the forward. Like a farmer praying for rain, bulls are praying for inflation. Or at least the fear of inflation.