Wednesday July 31, 2013 15:50
Market reacted exactly as expected. Stronger ADP numbers, not baaad, nothing to shake a stick at, but enough to suggest the economy is stronger - therefore tapering. GDP, not baaad, nothing to shake a stick at, but enough to suggest the economy strengthening - therefore tapering. And what do the markets do, sell-off, makes sense right? Did anybody read the reports? GDP, although 1.7% in the second quarter, was revised down in the first quarter. The ADP report was okay but certainly did not suggest a spike in employment. But, wait, the Fed is speaking. What was said? They will continue the current program as long as necessary and if the economy slows they will increase bond purchases. Read here, we are terrified of rates increasing prematurely and killing the housing cycle.
It took the market until 2:10 to wake up and if the primary motive to buy metals was an accommodative monetary policy, at least for the next quarter, the light bulb went off and the markets rallied. I am not a green light bull, but this was a gift for anyone that read below the headlines.
By Peter Hug
Global Trading Director
Kitco Metals Inc.