Gold

Janet Yellen's testimony today before the Senate Banking Committee was not much out of line with what she and the semi-united Fed have been saying since its last meeting. It was marginally - and we stress marginally - more hawkish than earlier statements.

Not a great way to start the week for precious metals bulls. Fundamentally, there was a rather unusual confluence of events that separately could not have caused as much havoc as they did all together.

This week has brought us some very interesting fundamental input that's influencing precious metals prices.

This week has brought us some very interesting fundamental input that's influencing precious metals prices.

Although it should not have come as a surprise to the world financial community, there seems to have been a bit of shock and awe created by the news that Portugal's Espirito Santo Bank conglomerate was missing debt payments. An audit in May shouted the warning, but it largely went unheeded.

The summer wind came blowin' in from across the sea...
      - Summer Wind

We mentioned last week that sometimes technical forces become so strong that in essence they become part of the fundamentals.

We saw just that today in gold trading and to a narrower extent in silver.

Of course gold is trading choppy and sideways as the yellow precious metal seeks new direction.

That direction is particularly hard to come by since extracurricular talk by various Fed members has been contradictory.

Gold and silver began digesting the meaning of the 288,000 jobs added in the U.S. in June. As they say in Italy, the number is giving them agita. That means acid reflux in both a literal and figurative sense. So, among other things, we've seen a nearly $10 swing between highs, lows, and back again (only down 60 cents in afternoon trading in New York).

Some things can be anticipated fundamentally.

When ADP, a private employment data organization, reported that the U.S. created 281,000 new jobs, we could be certain that the official Department of Labor figures would be in the same neighborhood.

While there are a variety of technical factors at work in the recent movement of gold, its inability to break out beyond the year's limits is indicative of an uncertainty about inflation.

One can simplistically pin this on fears about what the Fed might or might not do concerning interest rates and about the further wind-down of QE3. Let's start with the latter first.