Retail Activity Surprised Everyone
Nothing makes precious metals sell off quicker than sentiment turning from accommodative to tight and that happened this morning.
I love eating lunch at home, but nothing will make me drop that plan faster than a friend saying that he’ll treat me to dinner at my favorite restaurant, if I can just wait another hour or two and not get full.
Lunch is an important meal, but I can part ways with it, if a much better offer is on the table.
As of this morning, with retail sales in the United States reported as much better than expected, the market believes that the FED will part ways with its plan to wait on tapering and it will decide to begin much sooner than expected.
This is like your friend calling and telling you that dinner plans are actually cancelled, so he frees you up to eat lunch, as originally expected.
The market waited for confirmation on how strong the recovery is and it just got that confirmation; sure, it wanted to eat out at the restaurant, but it now knows that it won’t happen.
Gold bulls wanted to see massive CPI numbers, coming in this past Tuesday and wanted to see retail sales plummet in August, because of fears, but both expectations failed to arrive.
They can sit there and wait for dinner (gold $2,500), but they can also see that it looks dinner plans with a friend (inflation) have been postponed, so they should probably consider eating lunch (being patient), while their friend calls them to reschedule.
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This is why I never rest all of my hopes on any given sector, especially not commodities.
If the FED and the market and, indeed, if the economy continues rebounding and we need to tighten lending, this is deflationary.
As you can see, right now, things look to be the most relaxed in history, in terms of ability to access funds and government spending:
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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