Gold Newsletter's Brien Lundin: Gold market gets 'curiouser and curiouser'

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By Brien Lundin, Editor
Gold Newsletter, Metairie, Louisiana
Friday, April 24, 2015

"Curiouser and curiouser," cried Alice, in a statement that could be readily applied to today's gold trading session.

Granted, she was referring to talking rabbits and litigious queens, but that the dollar took a sizeable turn to the downside today, and gold followed it even further into the red, has to rank as a similarly fantastic occurrence.

The the dollar is down about 0.4 percent at last check, but June gold is down considerably more -- as much as 2 percent off from the day's highs for the yellow metal.

... Dispatch continues below ...



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That's not an easy thing to do. Not only are the fiat dollar and gold at opposite ends of the philosophical spectrum, they are also at opposite ends of the mathematical see-saw: Since gold is priced in U.S. dollars, every tick down in the dollar against its trade partners puts an equal amount of pricing pressure on gold in the upward direction.

So there have to be some very powerful forces at work to push gold lower along with the dollar ... just as it takes a special situation to drive gold and the dollar upward in unison.

Consider that both assets are considered "safe havens" in times of financial stress or uncertainty. For example, when the Swiss dropped their euro peg, the entire currency market was thrown into chaos, sending both the dollar and gold higher.

This should give us a clue as to what happened today. From all appearances, one would think that investors are becoming less worried -- or perhaps simply numb -- to geopolitical fears or a Greek exit from the euro.

Yes, a relief from these tensions could send both the dollar and gold downward. But no -- digging into the situation, it seems that the dollar dropped today on the back of more disappointing economic data (downturns in durable goods orders and business investment). The view is that the ongoing economic slowdown will convince the Fed to postpone rate hikes even further, perhaps into 2016, and that’s negative for the dollar.

Of course such a view would be exceedingly bullish for gold, so something else is up.

My buddies on the conspiratorial end of the spectrum will undoubtedly place blame at the feet of cartel forces, and frankly I can't find any better explanation in this case. I'm not one to blame every daily move in the gold market on surreptitious, malevolent forces, but I do believe that gold is pushed
around at key points. (In fact, I think the burden of proof is on anyone who claims the opposite.) Today seems like one of those days when someone was simply out to get gold, or there was a distressed seller in the market. ...

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