Gold and Silver Gain With Dollar While Stocks and Oil Fall

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Gain/Loss

Gold

$1576.90

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+$12.30

Silver

$28.68

+$0.15

XAU

137.04

+1.84%

HUI

361.32

+1.40%

GDM

1059.19

+1.64%

JSE Gold

1935.19

-72.06

USD

81.38

+0.32

Euro

131.89

-0.96

Yen

107.46

+0.56

Oil

$92.84

-$2.38

10-Year

1.976%

-0.045

T-Bond

143.8125

+0.71875

Dow

13880.62

-0.34%

Nasdaq

3131.49

-1.04%

S&P

1502.42

-0.63%


The Metals:

Gold climbed up to $1584.70 by about 11AM EST before it fell back off in the last five hours of trade, but it still ended with a gain of 0.79%. Silver surged to as high as $28.88 and ended with a gain of 0.53%.

Euro gold climbed back to €1196, platinum lost $32.50 to $1613, and copper fell four cents to about $3.56.

Gold and silver equities rose over 2% by midmorning before they fell back off a bit in afternoon trade, but they still ended with about 1.5% gains.

The Economy:

Report

For

Reading

Expected

Previous

Initial Claims

2/16

362K

358K

342K

CPI

Jan

0.0%

0.1%

0.0%

Core CPI

Jan

0.3%

0.2%

0.1%

Existing Home Sales

Jan

4.92M

4.94M

4.90M

Philadelphia Fed

Feb

-12.5

1.5

-5.8

Leading Indicators

Jan

0.2%

0.3%

0.5%

There are no major economic reports due out tomorrow.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil remained lower after the Energy Information Administration reported that crude inventories rose 4.1 million barrels, gasoline inventories fell 2.9 million barrels, and distillates fell 2.3 million barrels.

The U.S. dollar index rose as the euro fell on a report that showed services and manufacturing in the region shrank at a faster pace in February than economists forecast.

Treasuries found decent gains as the Dow, Nasdaq, and S&P dropped on poor economic data.

Among the big names making news in the market today were Hormel, Hewlett-Packard, and Carlyle.

The Commentary:

Yesterday’s downside reversal in the S&P 500, coming on the heels of the FOMC minutes, combined with a cornucopia of Central Bankers taking to the microphones today, seems to have FINALLY jolted the complacency of the Equity Perma Bulls. The Complacency Index, my name for the Volatility Index or VIX, has jumped quite sharply as signs are beginning to emerge that yesterday’s FOMC minutes have rattled those who have somehow been hypnotized into believing that Central Banks have a magic can filled with magic beans that magically make all problems go away into never, never land, never to be seen again except in the dark recesses of our imaginations.

Here is a look at the chart that has gotten the technicians extremely concerned….

The extent of the stock market rally that we have witnessed since the beginning of this year alone is proof in my mind that investors can be herded into unthinking behavior faster than the word, “oligoply” can roll off the tongue.

Let’s be honest here, the entirety of the stock market rally has been fueled by hot money courtesy of the Federal Reserve’s Electronic Printing Press. It began with it back in 2008 with QE1 and has continued ever since then. Yes I know some point to corporate profits and signs of improving growth but does anyone out there genuinely believe that this economy can withstand higher interest rates? If the growth is so solid and the path to recovery is so entrenched then why is the Fed still continuing to conjure $85 BILLION each month that it might have it injected into the economy. Come on already….

The current fiasco involving the so-called “sequestration” in Washington DC has served to remind the saner among us that the US government is on a path that can only be termed “madness”. The projected deficit for this fiscal year is over $ONE TRILLION. In a deficit of this magnitude, talk of even slowing the rate of spending increases (Washington DC speak for a cut) has brought out all manner of apocalyptic doom scenarios. What idiocy is it that grips the mind of these people? They are intent on bankrupting the nation. Historians paint a picture of the Roman emperor Nero supposedly fiddling while ROME BURNED. The current crop of leaders has certainly nothing on him. Matter of fact, they make Nero look downright statesman-like by comparison.

Here is the VIX CHART. Notice the sharp spike higher. Keep in mind that the only reason it had spiked higher in late December of last year was over fears involving the now infamous “fiscal cliff”.

Gold finally had some upside movement off its worst levels as it is seeing a bit of a reprieve from the nearly nonstop selling that has hit it since it took out support at $1640 last week. My buddy John Brimelow’s excellent “Gold Jottings” reports very good premiums being paid for Gold by Indian buyers overnight. Demand was strong in Asia for the physical metal.

While the bounce is welcome, it does not look particularly impressive at this point. I suspect that there are more guys looking to sell rallies right now as they were caught long in gold and did not get out during the initial break towards psychological support near $1550. As I stated in yesterday’s missive, gold needs to get back above $1640 to spook any of the shorts except for the most weak of hands. A move through $1620 will get some of them nervous enough to be ready to exit but the sentiment seems to be to wait around to see if the rallies have any staying power before exiting.

Something worth noting here, the Yen had a sharp rally, lots of short covering, as it and the US Dollar still remain safe haven currencies for some unfathomable reason. That implies a sharply weaker Euro and that is exactly what we saw today so far. The Euro got kicked in the groin by risk aversion trade tied to losses in the stock markets. Heck, the long bond finally showed some signs of buying although considering the extent of the jump in the VIX, for it to have trouble holding onto gains above a full point, tells me that there are still an awful lot of guys who want no part of bonds. Perhaps the thinking is if the Fed is going to throttle back on the bond buying program, there is no particularly compelling reason to lock in yields at such ridiculously low levels.

Let’s just close today’s thoughts with this… for the better part of nearly two months we have seen a near consensus among traders/investors that the Fed policy, in combination with the ECB, the BOE and the BOJ, had guaranteed smooth sailing in stocks. That led to one way trading in equities and in some of the currencies with the return of TRENDING MARKETS. That is the environment that traders, especially hedge funds LOVE. They find it extremely difficult to trade herky, jerky markets that whipsaw them up and down. The hedge funds were happy; the Central Banks were even happier as they had successfully herded the speculators into the markets they wishes them to ply their leveraged one way bets. All was well with the world, until….

Yesterday’s FOMC minutes have now injected uncertainty back into the minds of enough traders to return us to the wild up and down, nearly unpredictable movements of yesteryear. We’ll have to watch these things very closely to see if this is the start of another new norm of more wild price swings or if we can return to the one way trades that marked the beginning of this year. Keep an eye on the Euro as it will give us some clues…. other than that, we are all trying to watch to discern what comes next. No one ever said this business was easy.- Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

“First and foremost, I want to thank the “Silent Majority” of readers who wrote some very nice emails in the last 24 hours. It has help ease the pain considerably.

Speaking of pain, gold and mining shares have been badly beaten up and there’s no immediate relief in sight. The only positive is the bearishness has become overwhelming and if support can hold in the coming weeks, we should get a compelling contrarian situation not seen in years.

The line in the sand is $1,520 area. It should be heavily targeted by the overwhelming number of bears now. The sidelines remains the best place for gold buyers until the line in the sand is tested. The ultimate conservative approach remains not to be a buyer until gold can close above $1,700.

Mining and exploration stocks have been brutalized and it shall take weeks, if not months for them to repair the damage. I just can’t fathom how they do so without first seeing gold reverse its current bearish trend. I do think Rick Rule makes some very good points in this video about this sector. I do think those fortunate enough to have risk capital can begin a scale-down buying approach (you place bids from current price to lower levels).”- Peter Grandich, Grandich Letter


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