Behavior Problems

All major stock indices were up a bit over 2% today, reacting positively to the bone the Republicans threw to the President. We say, better check your guns at the door before entering the saloon. Obama is a cool customer and even though he may not show it because of the ice water in his veins, he is pretty ticked off at the right wing. It may be time he attaches conditions to the lifting of the debt ceiling and tossing his own ideas into the budget process in general. Don't be surprised.

Gold is of at 4:30 NY time by 1.7%. Any safe haven momentum that gold and silver may have been offering through this manufactured crisis has gone with the wind. Although most economists and well-informed analysts have been saying all along that keeping the debt limit at its current level probably would not have happened. Hmmm... we're not sure. The right wing has plenty of kamikazes in its service. 

"Both Republicans and Democrats are starting to be a little bit more willing to find a solution and that's what is dragging gold lower," Danske Bank analyst Christin Tuxen said. 

A lot of the money that had been in gold and the money that was sidelined rushed into the sucking force of the equities markets. This was another classic risk-on day. The physical markets were offering no relief. India is moving sideways on gold although consumers there have begun to expand their personal silver holdings. Nor are the Chinese plunging into the precious markets. However, with prices having slid below 1300, we are liable to see some stronger physical demand. Sovereign banks may also join the purchase parade.

"When you don't have the big buyers coming in, it takes a lot to lift the market when you are relying on smaller players and physical buyers," said Thomas Capalbo, a precious metals broker at New York futures brokerage Newedge. 

According to Reuters, "gold's losses were limited by data that showed U.S. weekly jobless claims hit a six-month high last week as a computer-related backlog of claims was processed and a partial U.S. government shutdown began to hit some non-federal workers." This remains key for bulls because the next Federal Open Market Committee meeting will occur next week. (Mercifully, the one after that is not until December.) 

With each passing tick of the shutdown clock, it becomes less likely tapering of QE3 will happen in October and even in December. That should be good for gold. However, gold has become detached from some of its traditional external market influencers such as oil, which, like gold is going about its business and keeping its own counsel. 

Perhaps one of gold's chief problems at the moment is that we are living in a financial climate where balanced portfolios, ones that include a l'il bit of everything are becoming obsolete. 

The stock market roared today but the intransigent employment problem in the U.S. and much of western Europe has to nag at the economists who worry about such thing. Seventy percent of the most advanced economies rely on consumer buying. Low or stagnant wages, ultra-low inflation and poor income distribution are all sounding the knell for the free-wheeling purchasing frenzies of the past made by the everyday average family family. 

Maybe it's time to increase the stimulus again. 

Wishing you as always good trading,