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Defensive Assets Firm


Let's notice that both spot gold prices and the Sept 10-year T-note futures are firm again this morning, extending last week's rallies and pushing up towards a test of their recent bull market highs -- while the Emini S&P 500 attempts to stage a thus far feeble recovery rally.

Among other things, the strong price action of gold -- including the SPDR Gold Shares (GLD) -- and bonds suggests strongly that for the moment, quarter-end money flows are NOT exiting those markets that are perceived to hedge market and event risk, and instead appear to be attracting still more capital -- after the G20 and FinReg uncertainties have been removed.

What are they worried about? A return to relative weakness in the U.S. economy? A downside reversal in the dollar resulting from Mr. Market "rewarding" fiscal austerity in Europe, compared with the persistent pursuit of Keynesian remedies from the U.S. leadership? Who knows? The fact that we recognize the concern is really the key for investors and traders.

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