Economically, we are working in an extremely unusual atmosphere across the world.
Germany’s business confidence index was up significantly on the same day that Great Britain-watchers declared that country to be definitively in a recession, the third since the economic crisis started in 2007.
U.S. weekly unemployment claims dipped to a 5-year low, but when January job numbers are issued the unemployment rate will remain unchanged at about 7.8%.
The S&P eclipsed the 1500 level and many equities analysts are predicting a bull run in the stock markets. Earnings are up modestly among blue chip companies, but the only really bright spot is the energy sector. (Even there, slow business and industry equals slow consumption.) And, as noted in our Daily Report here yesterday, the IMF offered a glass-half-empty assessment of economic growth worldwide and issued warnings that the big economies should not be cutting spending just at this moment.
The “irrational exuberance” over stocks may be one of the taps sapping money out of gold and silver markets and carrying that money over to equities. Of particular interest is the large percentage of small traders who are moving into equities.
“Economic conditions are looking up, so people are rethinking their investments in gold,” Frank Lesh, a trader at FuturePath Trading in Chicago, said. Lesh added that “Equities seem more remunerative than gold at the moment.”
There are other experts who – citing the magical 1700 level – say that since gold traders failed to break through to the top side, then necessarily gold will test lows in the 1550′s. (Silver also failed to breach 32.50 and so too was punished.) And the sun could go dark tomorrow. Next week brings another FOMC meeting. So far, the wires and waves are thin on information concerning the posture of the board. By Monday we should start getting some rumors or even solid statements.
One thing is certain, the recent U.S. economic news, while growing more positive, will not be strong enough to inspire the Fed to stop stimulating.
As always, wishing you good trading.