Economics Is The Jokey Science When It Comes To Gold

Forget the “Dismal Science.”

Everyone head for the bunkers. Pull down the metal shutters. The core CPI rose 0.3% in April, (although many would say it’s closer to 0.2% or even 0.1%).

Those particulars are meaningless given the perversion of “taking out” certain items from the data. Let’s take out some different items. Or maybe all items except kumquats. Flip-flops? Handkerchiefs? The economy is a whole, organic system, not one that can be shaded and pared down.

Point: data from the last twelve months through April 2015 show that, in fact, inflation is negative 0.2%.

Point: while energy is taken out of “core” data, the recent rise in oil affects the price of everything made, moved, heated or cooled in the country.

Point: There is no wage inflation. None. So why on earth would there be inflation in the price of goods and services? Magic?

Point: The U.S. economy is still struggling. The rest of the world’s struggles, except possibly Japan’s, are even worse. We challenge anyone to come up with a single month when all cylinders in the American economy were hitting.

Yet: the U.S. dollar is up almost a full percent today against the euro. (Which, truth be told, has its own problems independent of dollar strength.) The dollar is up even against the yen after a glowing economic report from Japan this week. The dollar is up 1.45% against the British pound.

Yet: traders are again worried about an imminent interest rate hike, if their actions are indeed speaking louder than analysts’ words.

Yet: Equities were pressured in the U.S. by the same misguided notions afoot in FOREX trading. Europe was mixed to down. Asia was strong, having closed before U.S. data was released.

All components in the energy markets were down. Both crudes as well as natural gas slid by 1.3% to 1.6%. Additionally, all crop commodities were down across the board. Livestock was up to mixed. Possibly the only sane actors on stage today were interest rate futures traders. All dollar and euro paper yields were depressed.

There could be another reason for all the naysayers and ditherers. Monday is a U.S. holiday, Memorial Day. Many traders have already paddled their way to the shallow end of the pool to wait out the three-day hiatus.

Moreover, Memorial Day signals the start of the summer in the United States: “Sell in May and go away.”

Wishing you as always, good trading,