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Summary

  • As a Russian aid convoy approaches its unwelcome receiver in Ukraine, Russia's leader convened with his Security Council in Crimea Wednesday, with plans to meet with his full cabinet today.
  • U.S. economic data, namely retail sales, disappointed Wall Street Wednesday, and showed softness in the American economy. Such softness would seem to reduce pressure on the Federal Reserve's rate schedule.
  • The SPDR Gold Trust (NYSE: GLD) remains supported by these events, despite dollar strength on euro weakness and despite the day's upward trajectory for stocks.

The geopolitical factor continues to drive the SPDR Gold Trust (NYSE: GLD), though with some support from economic data. The key current catalyst is that empty feeling traders have in their stomachs right now as an unwelcome Russian aid convoy approaches a testy Ukrainian border. But the GLD also found support from an unexpected source, as weak U.S. economic data was reported Wednesday.

(click to enlarge)

5-Day Chart of SPDR Gold Trust at Yahoo

The SPDR Gold Trust caught some lift at the start of Tuesday, despite dollar strength. The catalyst for each was a very distressed German Business Sentiment reading that sent the euro diving. This is consistent with my recent argument within articles that gold and stocks would diverge as the dollar strengthened on Russian rustling and despite the rising interest rate outlook in the U.S. Normally, we would expect gold prices, and so the SPDR Gold Trust , to decline on the current Federal Reserve schedule for interest rates. But because of the threat Russia poses to fiat currency and global stability, gold has support.

Looking eastward this morning, I only see darkness. A hefty Russian convoy of some 280 trucks is again headed to the Ukraine border. However, Russia has bypassed norms, and the Red Cross remains unaware of what the contents of those trucks are. Despite the contents, Ukraine vows to stop the trucks. Ukraine has indicated that the trucks would be inspected and still not allowed to pass unless they were surrendered to the Red Cross at the border, which would then finish the humanitarian mission to Donetsk.

However, Ukraine's leader said that the convoy would not be allowed to pass at all, as he called the Russian interest "cynical". As a result, traders will grow increasingly antsy as the convoy approaches the Ukraine border, and so the SPDR Gold Trust is well supported today.

Adding unexpected support Wednesday to the GLD, U.S. Retail Sales data disappointed for the month of July. Retail sales were unchanged, against economists' expectations for an increase of 0.2%. When excluding gasoline and automobiles, sales only inched higher by 0.1%, versus expectations for a 0.3% increase. It was disappointing and reflects poorly on the American economy. Such news should have appeased investors about the Fed's plans for interest rates, though with a caveat of concern about the economic situation.

The dollar continues to strengthen, though the catalyst is most likely the European outlook and the threat it faces from Russia. The GLD was up 0.2% Wednesday. What's interesting is the PowerShares DB US Dollar Bullish (NYSE: UUP) and the SPDR S&P 500 ETF (NYSE: SPY) were also higher. Normally, gold and stocks and the dollar don't move in the same direction, so it is evident to me that Russia is at play.

Security

08-13-14

SPDR Gold Trust

+0.2%

Sprott Physical Gold Trust (NYSE: PHYS)

+0.2%

Market Vectors Gold Miners (NYSE: GDX)

-0.1%

Direxion Daily Gold Miners Bull 3X Shares (NYSE: NUGT)

-0.0%

iShares Silver Trust (NYSE: SLV)

-0.7%

This article indicates that the Russian convoy stopped at a military base in the city of Voronezh, but it has resumed its journey today. This follows Ukraine's late determination that it would allow the transfer of the aid supplies onto vehicles leased by the Red Cross. Reports from Russia indicate a problem, because Foreign Minister Lavrov reportedly said (according to the article above) that Russia opposed the idea of transfer due to costs. However, it seems to me it would cost less for Russia to drive a shorter distance, rather than all the way to the blockaded region.

My opinion is that the Russian separatists in Donetsk are likely running out of supplies of all sorts. It troubles me that Russia's President Putin was in Crimea Wednesday holding a Security Council Meeting. Today, he is reportedly meeting with his entire cabinet and with lawmakers (see the same article). I believe these are the sort of meetings that would likely happen if military intervention were being given serious consideration in Russia.

A military conflict between Russian and Ukrainian forces would further harm relations with the West, and in my opinion, should support higher prices for the SPDR Gold Trust . But for now, the anticipation alone of this curious shipment arriving to a very skeptical Ukrainian receiver supports the GLD. I will update GLD interests regularly, and so invite readers to follow my column.

Source: GLD Today - Unwelcome Russian Convoy Approaching Testy Border