Gold, Oil and the Calendar

It’s not how they open. It’s how they close. The market shrugged off worries about the Chinese rate hikes. The market sees the rates hikes as a sign of strength in the Chinese economy. This will be the case until more weakness is seen in the Chinese economy and the yield curve becomes flatter. The tipping point will come as the media begins to downplay any future rate increases by the Chinese government. So, for something different, we will look for Chinese rate hikes to go from page one to page sixteen.

Market had its slowest full day of the year yesterday as the snowstorm paralyzed the Northeastern United States. Money managers tend to spend to last week of the year on pins and needles as their performance numbers are put in stone for the year. This time of high anxiety can be punctuated by volatility as trading desks remain understaffed with inexperienced traders. This can lead to the old rush for the exits before year-end performance gets trounced. We can thank the snowstorm for calming this volatility as money managers are more concerned with getting to the office rather than doing something once they get there.

As bullish as we are on oil, as each day goes by we are impressed with gold’s performance. Gold has been over bought for weeks but over bought assets can relieve that condition in one of two ways. They can go down reducing the price and enticing buyers or they can go sideways enabling investors to get used to the new price level. Gold has been going sideways consolidating its recent gains. Attention must be paid to the calendar as holders of gold may be wishing to push gains into the New Year. The New Year could see some selling pressure but we are inclined to be buyers. Watch gold as the calendar turns.

Answer: Robert Cray played bass for “Otis Day and the Knights” in the movie “Animal House”.

Today’s Question: What 2 future US Presidents crossed the Delaware River with Gen. George Washington on the night of December 25, 1776?