Gold Moves Higher on Dollar Weakness, Inflation Concerns

The dollar is a bit lower this morning, which is helping commodities bounce. Oil was back up near $44, but has fallen back since an inventory report came out. Gold has also spiked higher, hitting the $800 level again.

Inflation hawks keep saying that with all of the money global central banks are printing, we are going to be dealing with inflation down the road, and that will move gold higher. My only concern is that we have to get through this bout of deflation first, so I think that trade is premature. Although I do plan on adding back some gold exposure sometime next year.

Asian markets bucked the weakness in the U.S. yesterday, and rallied overnight. Hong Kong spike more than +5% higher. The Yen is also lower today, after making a new high yesterday. I would like to see the Yen come waaaaay down.

Reports say that the Democrats and White House have reached a $15 billion financial aid package for the automakers. The rumors are that GM and Chrysler will get money now, while Ford will not. I am against this bailout in principle, and think these companies need to restructure and materially downsize going forward, but I admit the economy is too fragile right now to let this happen today.

In corporate news, Electronic Arts (ERTS) lowered its earnings and revenue guidance due to what is describes as weak holiday sales. Rio Tinto (RIO) is cutting a whopping 14,000 jobs worldwide in an effort to reduce 30% of its workforce. This is a glaring example of the bursting of the commodity bubble, and its aftermath.

The 10-year yield is only slightly higher at 2.67%; the VIX is another -3.8% lower today to 56.6, but I still want to see it below the 50 level for starters (then 40, then 30).

The semis are up again today, leading the way. Banks stocks are the laggards so far.