The markets were mixed this week, with bonds and currencies little changed, stocks generally lower, and commodities mostly higher. The HUI gold stocks moved up with the commodity complex; crude oil was the only commodity to close down for the week.
Currencies were mixed, with the Euro and Japanese Yen gaining 0.8% and 1.7% respectively, while. the Canadian Dollar and Bitcoin fell 0.8% and 1.8%. Bitcoin trading was very quiet, with an average 29 kg changing hands each day on Mt Gox.
The USD was unchanged at 23.8 mg, but rose to 52.9% above its half-life curve, as the curve continues to fall every week. The "expected price" of the USD is now 15.5 mg, which is equivalent to a gold price of $2,001 – up from $1,995 the previous week. At some point, I expect the USD to "revert to the mean", falling rapidly to the 15.5 mg level and probably overshooting considerably to the downside. I recommend taking advantage of the strong USD now to purchase precious metals, select mining stocks, and other real assets – before the mean reversion crash.
Bonds were quiet, with the short term SHY unchanged, in sync with the underlying USD, while the long term TLT added 0.7% to close at 2.55 g. Once again, TLT is staying very near its support and resistance levels.
Most stocks were lower, led by the Nikkei, which retreated 4.3%, giving up much of last week's gain, and making the Nikkei this week's worst performing asset class overall. The Dow Jones Industrials lost 1.5%, while the S&P 500 dropped 1%. The HUI Gold Bugs Index was the only equity index to gain ground, rising 2.3% to close at 5.7 g. Last week's comments on playing the gold stocks still apply; we are waiting for confirmation of the market's next move.
With the exception of crude oil, commodities were all sharply higher. Crude pulled back 0.9%, pausing for breath after last week's 3.8% surge. Copper just kept on rising, however, adding another 4.5% to last week's 3.7% gain. Over the last few months, copper has been in a rising channel, making a series of higher lows and higher highs, but it remains well below its long term average price of 213 mg.
Silver and cotton were almost as strong, gaining 4.4% each. Silver bounced smartly off its lows to close at 0.483 g/oz, about where it was trading a month ago. Platinum added 3.9% to close at 35.5 g/oz, now 14% above gold parity.