Gold went the wrong direction Wednesday, at least as far as the standard logic goes, falling 1.5 percent to 1,721.60 per troy ounce.
The precious metal has been influenced with almost single-minded purpose in the past year or more, as traders fixate on the possibility of the U.S. Federal Reserve printing money, which is what happens when it decides to buy U.S. Treasuries.
When that occurs, the value of the dollar goes down, which makes commodities priced in U.S. dollars more affordable to owners of foreign currency. That spikes demand, which drives the price of gold higher, which benefits anyone who figured this out ahead of time and bought gold early.
Since this is a fairly common play, the potential gains are diluted by the number of traders willing to play along, which means it works best if you own more gold than the next guy. In other words, the potential for this potential bonanza should drive gold up now. But that's the way of investment. Getting in early always means yesterday.
Equities spiked Wednesday on a Wall Street Journal report that said the Fed was likely to buy mortgage securities and Treasuries in 2013, likely by extending its current spending habit, which runs to $85 billion per month. About half the purchases are involved in Operation Twist, which is the trading in of short-term securities for long-term, a switch meant to signal to businesses that borrowing rates will remain low for the long term.
That seems to scare fewer monetary policy decision makers as the recovery limps along. Inflation is the symptom to look for and prices have been relatively tame since the economy tanked in 2008. The most obvious reason is that so many are out of work that raising prices would be a self-defeating gesture. Consumers flock to discount stores when they lose their jobs.
Another commodity of note, oil, can break out of the path of predictability, because economies in Europe and the United States might not offset the growing demand for oil in emerging nations. China's economy has also slowed, which is valuable from a pricing point of view.
For all that, it is getting harder to beat the odds, anyway. There are few, if any, breakout emerging economies when U.S. and European consumers are struggling.
U.S. stocks showed resilience until the third quarter corporate reporting season began. Only housing appears to be doing well, but housing cannot lead the charge out of an economic downturn. Yes, home equity should rise, but the number of home buyers is finite these days.
In international markets the Nikkei 225 index in Japan added 0.99 percent, while the Shanghai composite index in China fell 0.51 percent. The Hang Seng index in Hong Kong gained 0.99 percent, while the Sensex in India rose 1.75 percent.
The S&P/ASX 200 in Australia rose 0.68 percent.
In midday trading in Europe, the FTSE 100 index in Britain climbed 0.93 percent, while the DAX 30 in Germany rose 0.71 percent. The CAC 40 in France gained 1.03 percent, while the Stoxx Europe 600 gained 0.83 percent.