The Weekend Respite Over, Gold's Still Dropping

After electronic trading resumed at 6 PM ET, gold continued to drop. That drop was largely erased overnight, but continued this morning. As I write this post, spot gold's down to US$1143.50, slightly up from the day's low of about $1138. This Marketwatch story explains why: the U.S. dollar is still rising.

So does this other one. U.S. stock futures have slipped, on the fear that good economic news will encourage the Fed to raise rates sooner than expected. This fear means hope for U.S. dollar buyers, as higher rates should stimulate buying greenbacks for investment purposes and/or lessening carry-trade selling of them. That's part of the topsy-turvy world of investment expectations, one that's easy to satirize as Orwellian:

"Expectations Are Facts."
"Future Is Present"
"Good News Is Bad News."

It's not that bad, as the reaction to a good (or lousy) earnings report will reveal. We're coming off a bad recession, one that seems to have ended but may not have, and the uncertainties combined with hopes of getting in early does make for unusual interpretations. We're not really at the stage where some wag could get away with writing "The Theory of Oligarchic Expectationism."

...'though someone may be tempted to try.


Update: A Wall Street Journal report explains the drop as driven by traders taking profits, and (later) by automatic sell orders kicking in at about $1150. Unmentioned is the possibility that shorters are "playing the stop-loss orders." As I write this update, the stock market's shaken off the pre-market decline and gold's bottomed at about $1140. Currently, spot gold's at $1141.50.


As luck would have it, I also have an Orwell-bit-related update: an article that makes a serious try at making sense of current markets. It's entitled "Markets confusing you?"