Gold

Many financial pundits are saying that the nearly catastrophic decline in crude prices is at the heart of today’s steep drop in stocks. That steep drop is, in turn, responsible for a movement into gold, so goes the argument.

The holidays are slouching toward an end and the dollar almighty is ruling the road. The euro was down about 1% against the U.S. currency and, accordingly, oil fell – but even more than that, around 1.3%.

Buyers looking for a bargain helped gold achieve a small gain today, but they were smacked upside the head by the continuing robustness of the dollar.

Today, oil took another licking and gold came along for the ride. The dollar was up strongly once more, except against the British pound. Contradicting the usual expectations, U.S. equities were down, although that might be expected as those who are ready to book their losses do so before the bell tolls on 2014.

You Say Stop And I Say Go Go Go

So, sang the Beatles back in the day. They had a point about contradictory flows of feeling and thought, just as we have now in the precious metals markets.

End-of-year fear came scuttling out of the woodwork today, driving equities down and gold up. Even crude oil found something under its feet other than quicksand today.

Equities were up a small amount today amid cautious holiday trading, but the U.S. dollar continued its climb to supremacy, helping push gold lower. But the dollar doesn’t tell the whole story today for gold.

The chief outside market influence, crude oil, was down severely again, by around 2%. Gold was dragged down on that ride.

Short coverers and bargain hunters decked the halls today and drove gold prices up by almost $20 (as of 4PM in New York). As we have warned recently, this is a volatile time of year and today proved the point. On top of that, investors are squaring their books as the year ends and the best info we have is that one or two major players jumped out of their short positions and voila...

Well, not so much gold and crude. Pricing continues under pressure for those two leading commodities and the end of the downward push is nowhere in sight.

The news today is dominated by the revision of U.S. GDP to reflect 5% growth in the third quarter. After starting the year in the negative by -2.1%, the world’s biggest economy has become a roaring beast out of a story legend. The second quarter saw 4.6% growth. Combined, year-to-date, that means that the economy is growing at a 3.75% rate for the year.

As oil continues its spectacular decline, and prices for gasoline start eyeing $1.50 per gallon in some places, inflation seems like some old fading cowboy from a Saturday afternoon movie serial riding into the sunset on his aged horse. Goodbye, Old Paint. (That’s the standard name for an old cowboy’s horse.)

The dollar is driving the world – and possibly driving a few countries like Russia and Venezuela crazy. The dollar is now at its highest since 2009, up almost half of a percentage point on the euro today. Is this a bet by some investors that the Fed is about to raise rates? We think rather it is an indication of just how powerful the U.S.