I mentioned in a post last week that I am beginning to wonder if we are seeing a shift in sentiment towards "growth" in the economy. What is needed in gold, and especially in silver, is for investor sentiment to begin looking away from the "growth is steady but sluggish" theme to one of "growth is picking up and with it, so are the chances of inflation".
Today we had the US Industrial Production numbers. This is a gauge or measurement of the output of US manufacturers, utilities and mines. It registered a 1.1% increase from last month's number, the biggest jump in a year.
That seems to have sparked a move higher in silver which then yanked gold higher. I noticed that Copper was higher as well.
Equities went on a tear higher today as once again the thinking in regards to the QE thing shifted yet again. Today the thinking was that the Fed will hold pat on this month's meeting and will do nothing until March at the earliest so as to not jeopardize the recently improved economic data.
That in turn undercut the US Dollar and thus we seemed to get a binge of commodity buying. Crude oil, gasoline and heating oil, all rallied higher. The metals were all higher. Soybeans moved higher. Coffee and sugar went higher. There were some commodity futures markets that moved lower today but the majority of the sector saw steady inflows.
Whether this is a shift in sentiment towards the sector in general is still up in the air. Part of what makes deciphering all this even more tricky is the fact that these moves are now occurring in the middle of the Silly Season. Market liquidity is shrinking as traders square their book, closing out positions as we move to the end of the year. That allows for excessive price swings in both directions on relatively small-sized orders as more and more air pockets, both above and below the markets, are encountered.
Back to gold - it confirmed that it has entered a range trade for the time being as that uneasy truce between bulls and bears that I mentioned last week continues. The range is defined on the bottom near $1220 and on the top up near $1250 with short covering related spikes pushing prices up towards $1265 before the selling re-enters. Until this range is violated, in either direction, gold is marking time.
It seems to be unwilling at this point to make a decisive break in either direction more than likely due to the time of the year. As mentioned above, many traders are simply not all that willing to establish sizeable positions as the calendar is about to shift. They will wait until the beginning of the New Year before moving back into some of these markets in size. That is why I stated last week and wish to restate here for the sake of emphasis that reading too much into the day to day gyrations in these markets is not wise.
Tax considerations are also at work and trying to unravel that knot can be fruitless most of the time.
I have noticed that as I type these comments, silver has once again been unable to maintain its footing above the $20 mark. It is back to being a teenager once again. For the bulls to have any sort of chance of generating some upside fireworks in the silver market, they will need to get at least past the $21.25 level.
The S&P 500 is stuck between the 50 day moving average and the 10 day moving average. It is basically in the business of whipsawing traders right now.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
Trader Dan's free work will soon be available at www.traderdan.biz