Weigh It For Yourself

Equipoise is one of those $2 words that's really simple and elegant.  

And it reflects exactly where we are today in the gold market fundamentally. Forces are almost perfectly balanced, watchers are watching. Like the moment when a trapeze artist seems to attain weightlessness and we are all breathless.

Today and tomorrow, we have on the docket the meeting of the Federal Open Market Committee (FOMC), which is widely expected to stay on the same path it has been on. However, it is also thought that it may very well offer a more optimistic assessment of the U.S. economy on Wednesday when it makes its first public statement regarding the meeting's sentiment. Inflation may be a different matter, although it seems the Fed is committed to low interest rates for some time.

There is also a lot of chatter that the non-farm payroll numbers for April, due out on Friday, are going to be impressive. But remember: we have heard that tune many times.

"These are both expected to be generally upbeat on the economy... therefore that is going to be bearish for gold," said Robin Bhar, analyst with Societe Generale.

Additionally, the equities markets rallied today, except for the NIkkei, which was off almost one per cent. The Dow is in record territory. Needless to say, stock rallies siphon money from gold.

Now for the counter side of the equipoise.

Throbbing and threatening is the Ukraine situation. We don't like the prospects for peaceful resolution. But that is not even the most important fact in creating an unsettled economic atmosphere and therefore haven demand.

The real news is that Russia is getting itself into a tighter and tighter bind. Forget their gas and oil supplies to Europe. Forget their unbearable costs already for absorbing Crimea. There is money flooding out of Russia and back to home bases around the world, or to more stable second-world markets.

In another few months, the Russians will be paying 8 or 9% to borrow money. That's destabilizing.

And that's - unfortunately for the Russians - good for gold.  

As always, wishing you good trading,