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News As Noise: Gold Breaks Out

Friday, June 18, 2010, 12:32 PM
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It's important to have a mental filter in place when reading news articles, especially when they seek to explain financial movements.

For example, check out this little ditty in Bloomberg today:

June 18 (Bloomberg) -- Gold futures rose to a record $1,263.70 an ounce in New York as Europe’s fiscal woes and dimming prospects for the U.S. economy prompted investors to step up purchases of bullion as an alternative asset.

Well, here we might note that world stock markets are up today for the ninth day in a row and the US stock market is up 4.5% over the past two weeks. Those data points do not jibe well with the concept of "dimming prospects" for the economy.  Plus it's kind of hard to make the case that a rise in gold should correlate with dimming economic prospects.  One might actually make a better case for the opposite effect.

Instead, I think there's probably some other reason for gold surging today.  Here are a few other candidates:

 

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