Yesterday was "Buy Commodities" Day. Today seemed to be "Throw Commodities Away" Day. Just goes to show the day to day vagaries of our markets anymore.
I am not sure what was getting bought today to be honest as the Dollar was down, equities were down and commodities were GENERALLY down. Maybe it was a "Stuff the Money under the Mattress" trade.
Either way, the bounce in gold did not last very long. That is typical of most short covering rallies. They generate lots of excitement, like a flash in the pan, and then burn out nearly as fast as they started.
As stated yesterday, gold's big test will come tomorrow (Friday). That is when we get the latest jobs number. A surprise on the headline number to the upside will more than likely fan the talk about "Tapering" and we all know by now what that means for gold, and it ain't good. The converse is also true however. If the number disappoints, tapering talk will disappear and that should put some weakness into the Dollar and by consequence, strength in gold. Either way, we will see.
Interest rates have been slowly grinding higher. The yield on the Ten Year peaked at 2.873 today. Also 30 mortgage rates registered a ten-week high today according to a report in Barron's. This is the sort of thing that makes attempting to guess what the next move of the Fed is going to be rather difficult.
Every time these longer term rates have been sneaking up and pushing up mortgage rates in the process, it has checkmated the Fed which cannot then sound any sort of hawkish note on the bond buying program lest they end up causing interest rates to spike even higher quite rapidly. That of course would effectively short-circuit any so-called "economic strength".
Back to gold for the moment... it looked to me as if sellers were a bit hesitant to get too aggressive ahead of that payrolls number tomorrow. Selling did take the market down near $1216 but it popped a bit higher after the bears' caution became evident. Watch out however if that number comes in above expectations tomorrow. Bears will be growling in a big way.
The gold shares as evidenced by the HUI surrendered all of yesterday's nice gains, and then some. The sector continues to implode. That is about all that anyone can say about these things right now. Only the most die-hard of long term bulls are left in them at this point.
In looking over a few issues in particular, I noticed that Goldcorp put in a new CLOSING LOW for this leg. It is back to levels last seen in December 2008. ABX is back to levels seen in 2003! The shake up over there is welcome but they have a lot of work to do, that is for sure. Maybe they will get a decent risk management department as part of their housecleaning. They had better!
Crude oil ran into a wall near $98 today. It has come straight up for more than $6.00 and is taking an overdue breather. Yes, I understand all the bullishness about the new pipeline coming online next year but even at that, there is an awful lot of oil around. Maybe demand is up for this, maybe not. I have a SHOW ME attitude on this one especially given the weak state of the economy.
What's helping crude right now is the frigid weather which is generating a great deal of heating oil usage. Exports of products seem pretty decent as well.
Along that weather line, natural gas prices spiked higher today as well. Seeing nat gas with a "4" handle is taking some getting used to considering that it had not been able to climb through that level for the better part of some 19 months or so starting in July 2011. It briefly kicked through $4.00 early this spring and then promptly collapsed back down towards the $3.25 level. Cheap prices for the clean burning fuel has resulted in a large amount of demand shifting away from coal into this market and now that we have some cold weather, it is catching some buying. If it can climb above $4.50, it has an outside shot at making a try for a "5" handle.
Other than this, not much going on today as most of the major markets are bracing for tomorrow's numbers. That is when we will get the fireworks. There does seem to be some building nervousness which is registered in the VIX. It actually closed above 15 today, the first time it has done that since October 15 of this year. We are definitely seeing some two-way trade in equities as a result, something I might add that we have not seen a lot of this year. Lots of top picking is occurring. At some point the bears will catch it correctly. Maybe that will come tomorrow, then again, maybe not! We just have to wait and watch the price action subsequent to the payrolls number and formulate an approach at that point.
"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
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