Yesterday we said, "We're thinking that the Russians are speaking foolishly while acting wisely. So far, anyway."
Today we'd like to augment that, since some of the driving force behind gold's bump up is due to the Ukrainian crisis.
Elections are due in Ukraine about a month from now. The Russians are nearing an inflection point. If they wait to take military action, they're risking very deep world disapproval for interfering in a due process election. However, if they wait, they also risk facing an actual democracy in what will probably be a more pluralistic, yet still free, Ukraine, which will show more resolve in the face of the czarist threats.
And, as mentioned yesterday, and previously elsewhere in our newsletters to you, the Russians will be slapped with some painful sanctions that might hurt them 10 or even 20x more than they hurt the West, and for many years, even decades.
Anxiety over these possibilities - good, bad or indifferent - saw traders enter at the low of 1267 in order to start unwinding their bear bets and bring some of their positions into upside speculation. This is the classic short covering move.
Agreeing with us was Steven Scacalossi, the head of global metals sales at TD Securities in. "Risk appetite is being hit with expectation that the West will introduce more aggressive sanctions against Russian interests."
In other news, the durable goods report came in much stronger than expected, another indication that the U.S. recovery is good to very good now, although spotty sector by sector. While durables were up, new home sales for March (reported in April) were down drastically year on year. Housing and a generally improving economy go hand in hand.
But, due to Ukraine's problems, home sales didn't move the needle on the meter down but good news on the durables couldn't stop today's rise in gold.
As always, wishing you good trading,