Gold

On fears regarding a Fed rate increase gold tumbled in regular trading, a move down that was moderated by a substantially weaker U.S. dollar today.

The dollar was off about 1.00% against the euro. Equities were up but mixed, spotty first earnings reports pushing some stocks up and some down. Crude was up on continued worries about U.S. supplies and stockpiles.

A stronger dollar – what else is new? – helped push gold lower today. But it was regular trading that pressed down on prices driven by the fear that the Fed is about to boost interest rates.

Every once in a while it seems as though the stars align and the outcome is an unusual occurrence. After witnessing today’s trading activity a case could be made for today’s “rare occurrence”. Typically one sees a negative correlation between certain markets. Rarely do you see them all move in tandem.

That is certainly not the case today.

Hard as it is to believe, today’s U.S. dollar strength is being driven by the sketching out of scenarios by some Federal Reserve members who discussed how rates could rise earlier than is now assumed. That rocketed the dollar up.

We are in the midst of a strange week in the world of economic news and other broad impulses in markets. Chief in our mind is the concern over where equities earnings are headed. Second, we have to ask where oil is headed. Both, in different ways are contingent on U.S. dollar strength.

The fundamental puzzler for gold this week is whether the drastic drop in jobs creation is the start of a pattern or an anomaly.

Many markets, gold and silver among them, sought direction before the holiday weekend, but found little ahead of the anticipated jobs report due out from the U.S. Labor Department tomorrow.

Superficially, it seems that equities fell because of yet more mixed data coming from the American economy. It’s a bit more nuanced than that.

Analysts were expecting the ADP private employment report to clock in at about 225,000 new jobs created. It came in at a respectable but disappointing 189,000.

We are faced today with end of month/end of quarter maneuvering. Investors usually rebalance their portfolios at the end of a month, and do even more juggling at the end of a quarter, which was certainly the case for equities.