Paul Nathan of Kitco News: As we close the first quarter of the year, I think it’s appropriate to ask, “Where the heck are we?” It’s been a confusing and volatile quarter. Interest rates are lower than expected and telling us things are not all that good. The dollar is at the lower end of its recent range, which suggests that economic growth is weak. The stock market after falling furiously in January has rallied back but only to close unchanged at the end of the quarter – which says to me, it doesn’t know where we are either. And gold which was one of the best performers this quarter has suddenly turned down.
So let’s step back for a little perspective.
Consumer confidence has moved up to the highest level in 6 years to a new recovery high and home and car sales are doing well considering the severity of the winter this year. A snap-back is due as the winter fades; and copper may be signaling just that as it plunged and turned quickly to move back above 3 dollars.
Going into the second quarter we are sitting precariously on a teeter-totter that can go either way, up or down. The 10-year interest rate is dead in the middle of its range of 2.5 to 3%. If it moves down it’s signaling recession and deflation. If it moves up it is signaling inflation and growth. The CRB is holding support just above 300. Copper has rallied back and is holding above $3. So has oil which has rallied back above $100 dollars a barrel. If commodities fail to rally and move down again, it’s deflationary.
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Chart courtesy of kitco.com