March Blog Archives 2014

Gold prices end slightly lower but set for quarterly gain of nearly 7%. U.S. stocks ended higher, boosted by hopes of monetary stimulus from the European Central Bank. Gold last traded at $1,283 an ounce. Silver at $19.75 an ounce.

On the final day of the first quarter, gold is up about 7% year to date; despite recent corrections. An array of economic reports due out this week should have an impact on the financial markets going forward.

The first such report came out this morning. Though overshadowed by the Obamacare deadline, it showed more indications of a stagnating economy.

A gauge of Chicago-area businesses tumbled in March, hitting the lowest level since August, with drops in new orders and employment. The Chicago purchasing-managers index fell to 55.9 in March, down 3.9 points from February. Economists surveyed had expected a March index reading of 60.

Speaking of Chicago, Fed Chair Janet Yellen was speaking at a conference there this morning and her remarks sent some new signals on possible ongoing Fed monetary policy.

She said the recovery still feels like a recession to many Americans, which is why the central bank will keep its “extraordinary” support for the economy for “some time to come." This contradicts much of what she has said in the past several weeks, particularly on Capitol Hill before Congress when she has boasted of the success of the Fed in fueling the recovery.

It's no secret Americans have very little confidence in the economy and haven't for months. Beyond the way Americans may "feel", the actual economic statistics have sent mixed signals at best. This certainly doesn't have the characteristics of a "recovering" economy. In fact, there is plenty to suggest - from business activity and employment numbers - that the momentum is headed in the opposite direction and compounding the US dollar's problems.

The US economy is not the only world economy of concern for investors. China's economy is moderating. However, China's appetite for gold remains robust.

Withdrawals out of the Shanghai Gold Exchange (SGE) in the first quarter of 2014 are close to global new gold production. Sales have totaled 532 tons suggesting an annual total of 2,305 tons should this level of sales continue throughout the year.

Finally, Michael Lewis, author of Liar's Poker, a 1980s bestseller about excess and corruption in Salomon Brothers on Wall Street, is out with a new blockbuster book called Flash Boys: A Wall Street Revolt.

In the new book, Lewis maintains the US stock market is rigged by a few big traders using automated, ultra-fast computer programs.

"The United States stock market, the most iconic market in global capitalism, is rigged ... by a combination of the stock exchanges, the big Wall Street banks and high-frequency traders," he said in an interview with CBS's "60 Minutes."

The victims, he said, are "everybody who has an investment in the stock market."

"The insiders are able to move faster than you and play it against orders in ways you don't understand," Lewis said.

Not only are individual investors victimized by this activity but this program trading is a dangerous activity that can quickly spiral out of control. For instance, program trading played a major role in the October 1987 stock market crash when computer programs snowballed the downward momentum by triggering sell orders without human intervention. And those 1980s computer programs were slow compared to those of today.

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Gold prices lower on a stronger U.S. dollar and better-than-expected economic data. U.S. stocks end week lower amid concerns over the Fed raising rates sooner than anticipated. Gold last traded at $1,294 an ounce. Silver at $19.79 an ounce.

Geopolitical factors could be poised to once again take center stage in the financial markets. As we enter the weekend, there are 100,000 Russian troops massed on the border with Ukraine.

Just last week, it appeared the crisis was fading after Russia essentially annexed Crimea. But now it appears tensions are once again rising. Ukraine cut off utilities to the Crimean region and Russia rapidly moved 80,000 additional troops to the border.

Russian ruler Vladimir Putin claims the troop movements are just part of routine exercises but US intelligence doubts that claim. In fact, the U.S. State Department believes the Russian army is now prepared to launch an invasion of eastern Ukraine if President Vladimir Putin decides to pull the trigger.

It remains to be seen if Putin will pull that trigger, but the Russian military is not set up like the old Red Army. It would be a major logistical burden to leave 100,000 troops just sitting in place on the Ukrainian border and Ukrainian officials understandably fear the worst.

This is a factor that could very well transform the financial markets by the open of trading on Monday.

Elsewhere, the Federal Reserve is once again in the news. You may recall that the Fed flunked Citigroup in its latest "stress test", designed to determine how well prepared a bank is to endure potential economic scenarios. Today the banking industry is fighting back.

Bank executives and investors are lashing out at the Federal Reserve, attacking its stress tests as "opaque."

The stress tests provided a tailwind to US bank stocks when they were first deployed in 2009, shoring up confidence that the sector could withstand a deterioration of the financial crisis.

But the Fed has since raised the bar each year, demanding more capital and better procedures while refusing to heed banks' complaints that the process is too much of a "black box".

It certainly is no surprise that a governmental regulatory body has been less than forthcoming, but banks calling someone else "opaque" is certainly hypocritical.

One prominent factor in the financial markets lately is the prospect that the Fed will start to raise interest rates. Just last week, in the wake of comments from Fed Chair Janet Yellen, it looked like rates could rise as soon as the outset of 2015. Now, someone else at the Fed is waffling on that.

The U.S. Federal Reserve will need to keep rates at rock bottom until late 2015 and then increase them only moderately over the next year because it would otherwise risk derailing a building economic recovery, Chicago Federal Reserve Bank President Charles Evans told the Credit Suisse investment conference in Hong Kong.

"I personally doubt that the funds rate is going to start to increase before the middle of 2015.I think it ought to increase later than that," Evans said.

It will be interesting to see what impact Evans' comments have on the investment markets, but some experts already see trouble brewing in stocks due to Fed policies.

Once the Fed begins to truly reduce its massive bond buying programs later this year, markets could see a quarter of their value wiped off the books, Jay Jordan, founder of the Jordan Company, told CNBC today.

He blames the monetary policies of former Fed chair Ben Bernanke for artificially inflating asset prices through super-low interest rates:

"We've been living under the cloud of financial repression for the last four to five years."

Jordan said investors need only to look at what happened in emerging markets earlier this year to see how U.S. markets will react once the Fed ends its easy money policies.

"You've seen it start in the emerging markets," Jordan said. "It's already facing us. Their currencies are getting destroyed. Their GDPs are getting destroyed."

This morning, USA Today published 3 warning signs it says are flashing on Wall Street:

1. Not-so sweet IPO.

The high profile initial public offering of King Digital, the maker of the game app Candy Crush, got crushed, plunging nearly 16% in its first day of trading, vs. an average first-day IPO pop of 22%, according to Renaissance Capital. The dive sent shivers through the frothy IPO market, which has been flying high and earning comparisons to the IPO peak in 2000.

2. Hot momentum stocks cool off.

Wall Street "story stocks," such as mega-popular plays favored by Main Street investors, such as social media darling Facebook and electric-car maker Tesla, are getting slammed after skyrocketing earlier in the year. Facebook is 16% below its recent intraday high and Tesla is down more than 20%, which puts it in bear-market territory. Red-hot biotech shares, which were behaving in a speculative fashion, have also gotten slammed.

3. Leader turns laggard.

The once-hot Russell 2000, an index of small company stocks, that soared 37% last year and led the performance derby earlier this year, is not acting like a market leader anymore. Thursday, it closed 4.7% from its March 4 all-time high, and is now performing worse than the large company stocks in the S and P 500.

Indeed, skittishness is making a comeback.

Mutual fund investors are getting nervous. Last week, they yanked nearly $4 billion out of U.S. stock funds, marking the first outflows since mid-February.

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Gold prices lower on a stronger U.S. dollar and better-than-expected economic data. U.S. stocks end lower amid concerns over the Fed raising rates sooner than anticipated. Gold last traded at $1,294 an ounce. Silver at $19.71 an ounce.

America's largest banking conglomerate, Citigroup failed the Federal Reserve's so-called "stress test" recently, the second time in three years Citi has done so.

The Fed cast doubt on the bank's financial projections for its sprawling operations, rejected the bank's plan to increase dividends and repurchase stock and expressed concerns about the "overall reliability of Citigroup's capital planning process."

The Fed's criticisms echoed concerns voiced by investors and analysts after the discovery of a $400 million fraud in Citigroup's Mexican unit last month. The fraud, involving a Mexican company, forced Citigroup to restate its earnings and raised questions about whether the bank is properly overseeing its many units.

In addition to Citigroup, the Fed rejected the capital plans of the American units of three international banks: HSBC, Santander of Spain and the Royal Bank of Scotland, which operates under the Citizen's Bank brand in the United States.

Given similar doubts about Bank of America's performance in the stress test recently, it is beginning to look as if the banking sector is decidedly unhealthy. This could be an early warning sign of broader problems ahead in the economy and financial markets. A strong banking sector is virtually a prerequisite to a strong economy. Trouble in banking seems to reverberate into the broader financial services industry.

The banking sector is certainly not the only source of concern these days and that is showing up in Americans' attitudes on the economy. Americans' views remain depressed with only the slightest improvement compared to a year ago, according to the CNBC All-America Economic Survey. More than 80 percent view the economy as just fair or poor. Just 17 percent of Americans view the economy as good or excellent.

One economic factor that may be influencing Americans' attitudes toward the economy is inflation. Not inflation as reported by the federal government's Department of Labor with the monthly Consumer Price Index and Producer Price Index; but real, actual price increases. And even though the CPI and PPI may indicate inflation is benign, when consumers shopping for groceries are experiencing something altogether different.

US food prices, as measured by the CRB Spot Foodstuff Index, are up 19% so far in 2014.

In reality, inflation is tied to the value of currency and the US dollar has been losing ground, due to a variety of factors. We may be on the cusp of seeing an acceleration of that process.

More and more nations are viewing US economic and financial clout as overweight given the nation's fiscal and economic health. Many of the G20 nations--the 20 largest economies in the world--are unhappy that the US keeps flooding the world with dollars. There is speculation that, when the G20 meet next, there will be a movement to reduce the dollar's global clout.

It's difficult to blame other nations given the circumstances. After all, US economic growth has been downright anemic and other countries are suffering as a result. The US economy grew at a 1.9% pace in 2013, which was quite disappointing given that from 2009-2011, the White House was consistently forecasting a growth rate of over 4% for 2013.

Given the US stock market's current bull trend has been ongoing for some 56 months--longer than most bull markets last--an anemic economy is not good news. It's the stuff that brings bull markets to screeching halts. One analyst sees just that on the horizon.

Joe Fahmy of Zor Capital believes all indicators lead to a correction, the only question is whether it comes in the form of a crash or lengthy grinding. "The market can do one of two things," says Fahmy, "It can correct through price or correct through time."

Calling last year "almost too easy" for bulls, Fahmy sees parallels to 2004. "After we had a huge year in 2003 the market didn't really go anywhere. The S&P never corrected more than 10% and it just digested those gains."

That's the best-case scenario. The alternative isn't an extension of last year's 30% rally but something more akin to 2010 when stocks went on a brutal ride including a 1,000 point "flash crash" and a 15% slide between April and the beginning of July.

Fahmy says there's a decent chance of a correction into the summer as investors adjust their expectations. "If there is any upside volatility I think it will come in the fourth quarter."

That's a nice way of saying things are probably going to get worse before they start getting better.

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Gold prices lower, but remains above $1,300, on a stronger dollar and technical selling pressure. U.S. stocks ended lower after President Obama called for further economic sanctions against Russia. Gold last traded at $1,303 an ounce. Silver at $19.78 an ounce.

Gold has hit a 5-week low, creating a substantial buying opportunity for investors.

Gold has corrected due to two few primary factors:

1. Fed Chair Janet Yellen signaled last week that the Fed would continue tapering its QE bond buying program over the next 6 months and could possibly even raise interest rates in 2015.

2. There has been a pause in the tensions between Russia and Ukraine over Russia's annexation of the Ukrainian region of Crimea.

There is reason to believe both of these factors are fleeting. Evidence continues to mount that the US economy is not as robust as the Fed is saying and some analysts believe the Fed will have to go back on its plan to tighten monetary policy. With regard to Russia, there are indications that the conflict over Ukraine is just getting started. The US and EU are threatening escalating sanctions and Moscow has promised to respond in kind, meaning the conflict is widening geographically and also entering the economic arena. In addition, Putin and other officials in Russia keep saying things that indicate their desire to expand their empire are not over.

But even absent Ukraine and Fed policy, there are numerous factors supportive of higher gold prices, such as the climbing, unsustainable US national debt and the fact that the bull market in the US stock market is already well past its prime.

What could derail the US stock market?

One potential issue is the slowing US economy and the Fed's obliviousness to it. Just this morning, a report on capital goods orders signaled a cooling US economy. American factories received fewer orders for machinery, communications gear and computers in February, signaling business investment is slowing - often a precursor to declining profits - which ultimately determine the direction of the US stock market.

Another issue involves China and its economic problems. A series of statistics show a slowdown in China's economy and, most ominously of all, there have been a series of bank runs in rural China. Chinese government and banking officials (who are often one in the same) are dismissing the panic, basing it on rumors, but there is no denying the reality that China's economy is in duress and its depositors are not confident.

Given these longer-term factors, it is not shocking that experts maintain the outlook for gold remains positive.

Juan Carlos Artigas, director of investment research at the World Gold Council, points out that emerging market volatility will be supportive of higher gold prices.

David Mazza, of State Street Bank agrees with this assessment, and says there will be 44 major political elections worldwide this year — many of them presidential or parliamentary and in countries prone to turmoil like Turkey, Afghanistan, Colombia. If investors want to safeguard their portfolios during this time, they will need to diversify and consider assets that may have been unloved in 2013.

“Think about positioning portfolios to have some stability as risk could emanate from a variety of places that we haven’t been focusing on in the past year or so,” Mazza says, noting that events like Scotland’s referendum in September could give the market jitters.

James Rickards, portfolio manager at West Shore Funds is perhaps the most bullish of all. He sees the price of gold rising to $7,000 to $9,000 an ounce in the next three to five years. He expects a bear market in stocks and a collapse in confidence in paper currencies, both of which are highly bullish for gold.

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Gold prices higher on bargain hunting and safe-haven demand. U.S. stocks higher as consumer confidence rose more than expected. Gold last traded at $1,316 an ounce. Silver at $20.12 an ounce.

There are more signs of trouble in the US and key emerging markets economies as the war of words over Russia's annexation of Ukraine's Crimea appears to be entering the economic stage.

Sales of new U.S. single-family homes fell more than expected and hit a five-month low in February, pointing to continued weakness in the housing market. Combined with continued softness in the jobs market, this adds to an increasingly contrasting economic picture from the one Fed Chair Janet Yellen has been painting in recent weeks.

This is especially troubling because missteps by the US Federal Reserve have been responsible for some of the most severe economic catastrophes in US history, notably the "stagflation" episodes of the mid- to late-1970s.

The US Commerce Department reported this morning that home sales fell 3.3 percent to a seasonally adjusted annual rate of 440,000 units, the lowest level since last September. January's sales were also revised down to a 455,000-unit pace from the previously reported 468,000-unit rate.

This illustrates a trend that we have been noticing for some time now in government reports and statistics; revisions of reports released a month or more after original reports have almost invariably been revised downward or in a negative direction. This certainly calls into question the reliability of government reports and one cannot help but to suspect something untoward, given the revised reports never garner as much attention as the original reports.

The fragility of the US economy has prompted one professional economist to issue a warning about the possibility of an external event shocking the system and sending us back into recession.

Albert Edwards of financial conglomerate Societe Generale warns that the rate of growth of profits in the US is declining, something he says is an early warning sign of recession. Given that the current bull market in stocks is 56 months old--past the average duration of previous bull markets--the stock market and overall economy are both vulnerable to a slowdown.

Edwards points out a slowdown could occur due to an exogenous event.

What type of exogenous event? Take your pick:

• An economic slowdown in China.

• Emerging market declines or currency devaluations.

• Accelerating tensions between Russia and the EU/USA.

• An unexpected geopolitical crisis.

Yesterday, President Obama and leaders of some of the biggest Western economies renounced Russia's recent moves in Ukraine, saying they would suspend their participation in the G-8 "until Russia changes course." Obama also alluded to more expansion of sanctions against Russia, something the Russians have already stated would be met with retaliation.

Speaking of Obama, he rattled observers in the security field with a quip during a press conference in which he sought to downplay concerns over the tensions with Russia. President Obama said he's more worried about a loose nuke being detonated in Manhattan than he is about Russia. While it is likely this is just another example of Obama "going off script," the remark also served as a reminder that some exogenous events that could severely impact the investment markets are completely unpredictable. Conditions can literally change in the blink of an eye and that's why investors must provide themselves with the protection of gold as a form of financial insurance.

Meanwhile, an economic crisis has emerged in Brazil. This is a symptom of a broader set of emerging market worries troubling the financial markets periodically.

Yesterday, Standard & Poor's cut Brazil's sovereign debt rating closer to speculative territory in a blow to Brazilian President Dilma Rousseff, whose efforts to stir the economy from a years-long slump have eroded the country's finances. Brazil had its long-term debt rating downgraded to BBB minus, the agency's lowest investment-grade rating. S&P's move could prompt peers Moody's Investors Service and Fitch Ratings to follow with a downgrade of their own.

It's no surprise that individuals, institutions and governments are turning to gold.

Chinese gold imports into Hong Kong, which were already setting new records in recent months, are accelerating even more. It seems the economic uncertainty in China is prompting a flight to safety.

Not only were gold imports some 30% higher during February than in January, but they were also fully 79% higher than they were in February 2013. The latest figures out of Hong Kong suggest that far from Chinese gold demand slowing down this year it could even be accelerating. F or the first two months of the year net imports through Hong Kong totaled 192.8 tons as compared with 80.6 tons in the first two months of 2013 suggesting that imports over the 2 month period have actually risen by just under 140%.

China isn't the only nation buying more gold.

Iraq bought 36 metric tons of gold this month valued at about $1.56 billion in the largest purchase by a nation in three years. The Central Bank of Iraq acquired the metal to help stabilize the Iraqi dinar against foreign currencies. This is evidence of increasing demand overall for gold from many world central banks.

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Gold prices lower on a stronger U.S. dollar and selling pressure. U.S. stocks lower amid light economic news. Gold last traded at $1,311 an ounce. Silver at $20.07 an ounce.

World markets continue to be worried about a variety of potential problems including; the possibility of interest rate hikes by the Fed, persistent tensions between Ukraine and Russia, evidence of economic weakness in China and the seemingly endless line of reports showing the US economy is nowhere near as healthy as the federal government would have everyone believe.

Last week, Fed Chair Janet Yellen delivered an unwelcome surprise to the financial markets when she indicated the Fed would end its bond buying stimulus program this year and even start to raise interest rates in 2015.

One of Wall Street's "superstars" specifically blames Fed policies for America's economic stagnation. Jeremy Grantham, the co-founder of money management firm GMO, called Federal Reserve chair Yellen "ignorant" in the New York Times. He also said the reason for the slow recovery was not the severe financial crisis, continued high unemployment or the many standoffs in Washington. Instead, he blamed the Fed for ruining the recovery it was supposed to stimulate.

The latest evidence of a stagnating US economy came in this morning with a widely-watched manufacturing gauge. Markit's monthly U.S. manufacturing Purchasing Managers Index survey indicates a larger-than-expected slowdown in the pace of manufacturing output in March. The report's headline gauge fell to 55.5 from the February survey's 57.1 reading.

Unfortunately, the longer-term trend is no better, possibly even more discouraging.

The US is losing its edge as an employment powerhouse where the vast majority of people have a job or are looking for one. In fact, America's labor participation rate fell behind the UK’s for the first time since 1978.

The labor force participation rate in the US has plunged since 2008 from 66 to 63 percent. The equivalent of 7.4 million people are no longer part of the labor force.

Gary Burtless, a senior fellow at the Brookings Institution in Washington, said the US used to stand out among rich countries for its high labor force participation, but that is no longer the case. “The US used to have a reputation for being very hard working,” he said.

This trend means that the decline in the US unemployment rate is actually misleading. When someone drops out of the labor force because they no longer seek work, they are no longer considered unemployed. This is an indication that the jobs picture in the US is not as rosy as Janet Yellen and Barack Obama have preached.

Meanwhile overseas, geopolitical tensions persist between Ukraine and Russia with the two sides trading sharp rhetoric and Ukrainian and Western military experts concerned of further Russian aggression. This is one factor that isn't going away and it is also one for which there is no more effective safe haven than gold.

Speaking of gold, it has taken some hits in recent days due to Yellen's statements and fears of higher interest rates. These fears are myopic, which suggests that this correction is setting up a nice buying opportunity. A careful review of history shows that high interest rates have coincided with higher gold prices in the past. For instance in 1980-81, as US interest rates skyrocketed to record heights, gold hit an all-time high as well.

There are still a variety of factors which point to higher gold prices and the need for gold as a safe haven going forward: record US national debt, a faltering US economy, economic uncertainty in China and geopolitical tensions in Ukraine and Iran.

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Gold prices end higher on a weaker U.S. dollar and bargain hunting. U.S. stocks retreated from daily highs, still set for weekly gains. Gold last traded at $1,336 an ounce. Silver at $20.31 an ounce.

Times have been good for holders of gold so far in 2014 despite predictions of lackluster performance from big financial institutions. Analysts weren’t expecting much from gold this year. Many big banks were forecasting average 2014 prices below $1,300 an ounce, down from last year’s average of $1,413. But the precious metal has already managed to outperform U.S. stocks, bonds, emerging markets and the dollar.

One factor that has prompted investors to turn to gold is concerns over the future prospects for the Chinese economy, the 2nd largest economy in the world after the USA. Data indicate that the Chinese economy is losing momentum. CBB International's China Beige Book survey, published this week, showed China's economy slowed this quarter, with industries including retail and mining showing weaker revenue growth while loans through non-traditional channels became more expensive.

“The pace of Chinese economic expansion has plainly slowed,” Leland Miller, president of survey publisher CBB International, said.

A future factor for which gold could be called on to provide shelter might be trouble in the US banking sector.

In the event of a deep recession in the United States, steep declines in home prices, and recessions in the euro area as well as Japan; 30 major banks in the U.S. would lose a total of $501 billion over nine quarters, according to the latest round of stress testing from the Federal Reserve.

One bank, Salt Lake City-based Zions Bancorp, wouldn't meet the Fed's minimum standards for capital in a worst-case scenario. However, there is another bank that private sector analysts have concerns about and it isn't a small bank. It's Bank of America. Goldman Sachs believes that most U.S. banks came out of the recent stress tests looking pretty good, with one notable exception: Bank of America.

The second-largest bank in terms of deposits passed the test but left some analysts wondering just how strong its cash position is. Goldman Sachs expressed its concerns in a note today.

When the one bank that is causing private analysts to be concerned is the 2nd largest bank in the country, that isn't very comforting, no matter what the Federal Reserve may say about its "stress" testing overall.

On a final note for the week, in case anyone still clings to the illusion we can trust the so-called "mainstream" financial media, Bloomberg's CEO stated this week that the news agency should have suppressed negative stories about China in the interests of promoting its own business enterprises there ...a rather bald-faced admission that manipulation is alive and well.

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Gold prices settle lower on selling pressure and a higher U.S. dollar. U.S. stocks higher as Fed stress tests released. Gold last traded at $1,330 an ounce. Silver at $20.43 an ounce.

The stock market does not like surprises and yesterday Fed Chair Janet Yellen surprised the market when she stated that the central bank’s bond-buying stimulus program could end this Fall and benchmark interest rates could rise six months later.

US stocks fell across the board yesterday in the wake of the revelation. Stock markets in Asia and Europe also fell.

The irony here is two-fold.

First of all, Wall Streeters can't possibly be worried that the end of the Fed stimulus program will weaken the economy, because the economy has already been weakening. Wall Street is upset that the stimulus has pumped up liquidity to artificially inflate the stock market and it hates to see that coming to an end.

Secondly, Yellen actually believes the US economy is robust and thus feels comfortable ending that stimulus. One is left wondering at what information can she possibly be looking.

Jobless claims rose once again in the US to 320,000 in the period of March 9 to March 15. Some on Wall Street are cheering this report because they thought it might be even worse. That just shows the level of pessimism about the economy in general. Meanwhile, the government said continuing jobless claims increased by 41,000 to a seasonally adjusted 2.89 million in the week ended March 8. Continuing claims reflect the number of people already receiving benefits and are reported with a one-week delay.

Just how pessimistic are Americans about the economy?

Americans were most pessimistic on the outlook for the economy in March than at any time in four months, the Bloomberg Consumer Comfort Index showed today.

This type of pessimism is understandable given the disappointing economic growth the country has been experiencing. Especially given the Congressional Budget Office and growing number of private analysts predict slowing economic growth will be with us for the foreseeable future.

There are a variety of reasons for this, including simple demographics and also a growing tax and regulatory burden on the middle class, historically the engine of growth for the US economy.

This is not great news for the stock market obviously, since stocks are eventually dependent on underlying economic fundamentals. Lackluster economic growth over the long-term means lackluster stock market performance. Gold, on the other hand, is unaffected by such factors in addition to moving independently.

In fact, gold has another new believer. Much followed market commentator, Dennis Gartman, confirmed in a CNBC interview yesterday that he remains bullish on gold with the price taking a likely continuing upward path.

This is significant because Gartman certainly cannot be described as a gold "perma-bull." Gartman turned bullish on gold just over a month ago. Prior to that he’d been bearish in 2012 and non-committal at the start of the current year. In his own words, "gold is quietly moving from the lower left to the upper right and I think that will continue."

Gartman has been publishing The Gartman Letter for over 25 years and has built up a huge following given his prescient investment advice. He is very much a neutral commentator on precious metals, calling the ups and downs as he sees them at the time and his track record has been good.

LATE ADDITION: Late this morning, President Obama signed an order to impose sanctions on more segments of Russia's economy in response to Moscow's annexation of Crimea. Obama said the new sanctions will target Bank Rossiya, which provides material support to Russian leadership, as well as the 20 individuals linked to the country's annexation of Crimea. It remains to be seen if and how Moscow will retaliate for this latest round of sanctions and what the economic or financial market fallout may be.

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Gold prices sharply lower after Fed voted to cut its bond-buying program for a third straight meeting. Gold last traded at $1,339 an ounce. Silver at $20.60 an ounce.

All eyes in the financial world are on the US Federal Reserve today as it wraps up two days of meetings. Newly-minted Fed Chair Janet Yellen is due to speak to the press this afternoon.

It's not difficult to predict what Yellen will say. The problem is that what she has said thus far in her tenure has been of questionable accuracy.

Yellen has set a pattern of making rosy statements for consumption by Wall Street--statements that don't match actual economic conditions.

Yellen is playing the role of cheerleader rather than giving an honest account of the effect of Fed policies.

The Fed has maintained that its policies, of near-zero interest rates and bond-buying, have created an economic recovery.

This public relations stance is questionable on two levels:

1. There are serious signs the US economy isn't recovering. In fact, it looks like the employment market is trending in a negative direction.

2. Even if the US economy is recovering, there is scant evidence that Fed policy is responsible. In fact, its policies of undermining the US dollar are arguably counterproductive, certainly in the short-term, but especially over the longer-term.

We shouldn't be surprised if Wall Street reacts positively to Yellen's press conference. But the real litmus test will come in the coming days and weeks when more economic data emerge.

Meanwhile, the world hasn't completely forgotten Ukraine. There has been a pause in activity since Russia essentially annexed Ukraine, but that pause may not last long.

Already, Russian and Ukrainian forces have skirmished in Crimea, where Russian forces seized Ukrainian naval headquarters. Russia continues to amass troops near Ukraine and Ukrainian forces have begun to set up defensive positions along the border as well.

For his part, Putin has stated he has no interest in invading any other territories. That certainly remains to be seen. If the crisis isn't defused, or if tensions escalate, this will be a factor that will continue to prompt investors and traders to seek gold as a safe haven.

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Gold prices end lower ahead of key Fed policy meeting. U.S. stocks rally after Russian annexation of Crimea. Gold last traded at $1,359 an ounce. Silver at $20.86 an ounce.

Tensions surrounding Ukraine appear to be ebbing for now, but that doesn't mean the outlook for gold is changing. In fact the outlook for gold is brighter than ever and is tied to a variety of factors besides tensions with Russia.

With gains of about 15 percent so far this year, gold has surprised most so-called "experts." But investors should obviously be more interested in whether gold's 2014 gains are sustainable -- and specifically whether gold will continue to outshine other assets going forward.

Several factors are continuing to support gold prices.

One, after a decline in the price of gold in 2013, bargain-hunting investors became attracted to gold as a value investment.

Two, record-setting Chinese demand. China alone bought more than 1,000 metric tons of gold for jewelry, bars, and coins over the past 12 months, putting China ahead of India in terms of gold demand for the very first time.

Three, economic trends around the world have been driving safe-haven buying of gold. In the US, a tough winter has had a measurable impact on the overall economy, with retailers seeing less customer traffic and manufacturers therefore having less demand for the goods they make. Worse yet, there are persistent signs the US jobs market is trending in a negative direction. Meanwhile, signs of a potential economic slowdown in China have raised additional concerns around the world.

Fourth, geopolitical tensions have put gold in a brighter light with the current conflict between Ukraine and Russia having huge potential to drive further price gains. The current pause in tensions with Russia is likely to be short-lived. Russia is the world's fourth-largest producer of gold, with roughly 5,000 metric tons of known gold reserves and production of more than 200 metric tons in 2012 . If the US and other Western countries impose economic sanctions on Russia, the impact on the gold market could be huge; both in terms of supply and demand and from the ramifications of such restrictions on financial markets generally. But don't forget, though the Russians are mocking Obama for the sanctions he has imposed so far, they have more in their economic arsenal than ridicule. The Russians have threatened their own sanctions for retaliatory purposes.

Analysts view the rally in gold as sustainable as well.

"In fact, it is sustainable," says Richard Ross, Global Technical Strategist at Auerbach Grayson. "Emerging markets are on the ropes right now. You're seeing what's going on in Russia. Even in Europe, the momentum is slowing. All of that continues to favor gold."

Ross notes that gold has broken above its 200-day moving average and is headed towards resistance not far above its Monday settlement price of $1,392.60 per ounce.

"I think the next stop is $1,420," says Ross, who sees the yellow metal potentially making its way to $1,560 per ounce. "Clearly, you want to be a buyer down here and a seller higher later."

Federal Reserve monetary policy, which is undermining the dollar over the longer-term, also supports gold movement up. The Fed continues to set interest rates at negative real levels, which is highly inflationary.

Everything about new Fed Chair Janet Yellen's philosophy and background suggests those policies will continue in perpetuity.

Under such circumstances, gold will continue to look attractive in dollar terms, no matter what happens in Russia.

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Gold prices end lower as a rally in U.S. equities lured investors away from the metal. U.S. stocks rally after upbeat data. Gold last traded at $1,372 an ounce. Silver at $21.27 an ounce.

Over the weekend, Crimean voters backed a referendum to secede from Ukraine and join Russia.

Now the economic and diplomatic threats are flying.

President Obama announced today he is leveling new sanctions against seven Russian officials the White House says have contributed to the crisis in Ukraine. He also warned that if Russia continues to interfere with Ukraine's sovereignty he stands ready to push for even tougher sanctions.

The sanctions focus on the individual personal assets, but not companies the officials may manage on behalf of the Russian state. Any assets the individuals have in U.S. jurisdiction have been frozen and Americans are prohibited from doing business with them.

The European Union announced travel bans and asset freezes on 21 people for their involvement in the Ukraine crisis.

Russia is not remaining passive in the face of these sanctions, which will contribute to the economic fallout from this crisis. According to Putin’s economic advisor Sergei Glazyev, Russia can dodge US sanctions by switching from the US dollar to other currencies and creating its own payment system. In addition, Glazyev said sanctions imposed by the US against Russian government institutions could force Russia to cease repayment to US banks.

The Ukraine crisis is prompting hedge funds to move back into gold. After shunning gold for most of last year, hedge fund managers are piling back in as the escalating crisis in Ukraine spurs a rebound. Speculators now have the biggest bet on a gold rally since December 2012. Last week gold reached a six-month high. Investors who rejected gold in 2013 are now buying the metal at the fastest pace since 2007.

But Ukraine is not the only driver of higher gold prices. According to Royal Bank of Canada Capital Markets, gold is entering a new bullish phase similar to 2005-2008. Over that period, gold doubled in price from $450 to $900.

Another factor that has prompted investors to vacate the US dollar and accumulate gold is the weakening US economy. This has been particularly apparent in the US jobs market. Today there is more evidence along those lines. Payrolls decreased in 27 U.S. states in January, showing a slowdown in job growth extended throughout much of the country.

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Gold prices close higher for fifth straight day, end up 3% on week. U.S. stocks fall most in five weeks. Gold last traded at $1,379 an ounce. Silver at $21.41 an ounce.

The world is experiencing turmoil and uncertainty on a number of fronts and the result is a rising gold price and falling stocks.

World markets have been slammed by economic trouble in China, the Russian aggression in Crimea and evidence of an economic slowdown in the US.

China, the world's second-largest economy, released weaker-than-expected February retail sales and industrial output figures on Thursday, fanning worries about the health of its economy.

This was the driving force behind steep falls in the Tokyo, Hong Kong and Shanghai stock exchanges overnight. Japan's Nikkei index fell more than 3%. Hong Kong fell 1% and Shanghai was down 0.73%.

London and Paris exchanges also fell, spooked by China and the tension in Ukraine/Crimea. Russia seems to be on the verge of annexing the Ukrainian region of Crimea via a hastily arranged referendum. Ukraine appears powerless to do anything to prevent it. The question remains, however, whether the West will impose sanctions on Russia and what impact any such sanctions might have on the global economy.

Gold has responded well to the crisis and will likely continue to serve as a safe haven in any subsequent economic fallout due to its independence from paper assets; such as world stock markets and man-made currencies, be they Russian, European or American.

An example of this has already been seen on a microlevel in Crimea, where bank customers are lining up to withdraw cash from their accounts. Banks in the region are struggling to deal with the situation and, ominously, some have imposed strict limits on daily cash withdrawals, denying customers their own wealth while the entire country seems to be on the edge of an abyss. This is a classic situation in which closely-held, physical gold would provide safety and peace of mind.

In less dramatic but disturbing news, there is yet more evidence of economic troubles here in the US.

A report that closely analyzes government employment data indicates millions of Americans are literally dropping out of the workforce, which has the ironic effect of lowering the unemployment rate.

Among the findings:

-In the fourth quarter of 2013, the standard unemployment rate (referred to as U-3) for native-born adults who have not completed high school was 16.6 percent, while for those with only a high school education it was 8.5. The U-3 unemployed are people who have looked for a job in the last four weeks.

-The broader U-6 measure of unemployment — which includes those want to work, but have not looked recently, and those forced to work part-time — was 28.7 percent for native-born adults who have not completed high school and 16.5 percent for those with only a high school education.

-The total number of native-born, working-age adults (18 to 65) of any education level not working (unemployed or out the labor force) was 50.5 million in the fourth quarter of 2012 — 8.8 million more than in the fourth quarter of 2007, and 14.7 million more than in the same quarter of 2000.

-The share of working-age (18 to 65) natives holding a job has not recovered from the Great Recession. In the fourth quarter of 2013, 31 percent were not working, a number that has barely improved in the last five years.

-In the fourth quarter of 2013, there were only two working-age natives holding a job for every one that was not employed. This represents a huge deterioration. As recently as 2000, there were three working-age adults holding a job for every one not working.

Another economic statistic shows a lack of confidence in the US economy's health.

The widely-watched University of Michigan/Thomson Reuters gauge of consumer sentiment declined in March to hit the lowest level in four months, cut by weaker expectations for the economy. The gauge f ell to 79.9 this month from a final February level of 81.6.

Amid all these global factors, geopolitical and macroeconomic, is it any wonder gold is up 14% so far this year, far outperforming other asset classes?

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Gold prices close higher as a pullback in U.S. equities provided investment appeal for the metal. U.S. stocks fall most in five weeks. Gold last traded at $1,372 an ounce. Silver at $21.20 an ounce.

World stock markets are markedly lower today, based on a variety of factors.

The Tokyo and Hong Kong stock exchanges declined overnight as worries persisted about a slowdown in the Chinese economy. Two reports on the Chinese economy were released overnight ...

China's combined industrial output for January and February rose 8.6 percent from the year ago period, official data showed Thursday, worse than a consensus forecast from surveyed economists for a climb of 9.5 percent.

Combined retail sales in China for the period were up 11.8 percent on year, missing economists' expectations for an increase of 13.5 percent.

Frankfurt, London and Paris stock exchanges all fell as well, partially on news of the disappointing Chinese data, but also based on continued worries over the Ukrainian crisis.

Tensions in Ukraine appear set to continue with a referendum for the Ukrainian region of Crimea still due to go ahead over the weekend. Leaders from Germany and Poland have said the EU would go ahead with economic sanctions for Russia if the country decided to miss an arranged meeting which aims to deescalate the situation.

Ukraine Prime Minister Arseniy Yatsenyuk met with President Obama at the White House Wednesday as the administration looks for ways to head off the crisis in Ukraine. President Obama also mentioned possible sanctions.

Economic sanctions in this scenario would not be painless for the West since many European companies, in particular, have operations and conduct sales in Russia. The Dow is sharply lower today despite rather positive reports on US retail sales and employment. It seems there is a general worry about the US stock market, in addition to concerns over China and Ukraine.

The outlook for the dollar may continue to be negative based on the philosophy of President Obama's latest nominee to be Vice Chair of the Federal Reserve. Stanley Fischer will be questioned closely about his views on how quickly the Fed should wind down its stimulus policies at his Senate confirmation hearing today. He will testify that the economy has made "significant progress" since the recession but the central bank's stimulus policies are still needed, according to his prepared testimony.

There is of course a great deal of evidence that the economy is actually trending in the wrong direction, despite what the Fed and Fischer have been saying. This would suggest the current monetary policy has not been successful in stimulating the economy.

The one sure effect of inflationary monetary policy will be to undermine the value of the US dollar.

In the face of stock market turmoil, a declining dollar, geopolitical tensions and global economic uncertainty; the clear solution for investors is gold. That's because gold has historically provided a safe haven in just such scenarios.

And it is playing that role today.

Gold’s 14% rally this year has confirmed that the precious metal is still viewed as a safe haven by investors.

“Safe-haven status is confirmed in bad times, not good, and gold has again passed that test,” said Julian Jessop, chief global economist at Capital Economics.

This year’s rebound has, in part, been fed by pessimism. U.S. economic data have missed expectations.

In addition, an emerging markets’ currency crisis broke out in January, raising fears of contagion. The resulting geopolitical unrest, including protests in Venezuela and Thailand as well as a military standoff between Russia and Ukraine, helped spur even more demand for gold.

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Gold prices end sharply higher to mark their highest close since September. U.S. stocks finished flat on China, Ukraine fears. Gold last traded at $1,370 an ounce. Silver at $21.36 an ounce.

Gold is surging as investors worry over Russian aggression against Ukraine and the Chinese economy.

Gold has hit a near six-month high today as fears of more corporate defaults in China and the geopolitical tug-of-war between Russia and Ukraine hurt equity markets; boosting the metal's appeal as an insurance against risk.

The Group of Seven advanced economies will demand that Russia halt efforts to annex Ukraine's Crimea region in a statement to be issued later today. This week, Russia has essentially blockaded Ukraine's Crimea region, cutting off flights into and out of the region.

The renewed jitters in China come after the authorities allowed solar company Chaori to default last week, the first ever failure in the country’s domestic bond market.

Gold has gained 13 percent this year, on worries of soft economic growth in the United States and China.

But economic weakness is not just limited to the US and China. The loss of economic momentum in some emerging market economies (EME) is affecting global growth, the OECD (Organization for Economic Cooperation and Development) warned yesterday. Because emerging economies now account for over half the world economy, the slowdown among emerging countries is as serious in some ways as the slowdown in the US and China.

Finally, there is another warning sign of trouble in the US stock market.

The amount of money investors borrowed from Wall Street brokers to buy stocks rose for a seventh straight month in January to a record $451.3 billion, a potential warning sign that in the past has coincided with irrational exuberance and stock market tops. Getting a loan from a broker to finance stock purchases has often been a sign of overconfidence in the outlook for the stock market, especially one trading in record-high territory.

In dollar terms, the current amount of margin debt dwarfs the amount borrowed near the past two stock market peaks in 2007 and 2000, according to New York Stock Exchange data. In March 2000, a then-record $278.5 billion in borrowed money was riding on stocks just as the Internet-stock bubble began bursting. The next record for margin debt didn't occur until July 2007, when broker-supplied loans to investors swelled to $381.4 billion just three months ahead of the market peak and subsequent financial crisis in 2008.

Gold is an excellent diversifying asset for stock investors, since it tends to react differently to economic and geopolitical factors than stocks do.

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Gold prices higher on safe-haven buying as traders keep an eye on Ukraine. U.S. stocks end lower, Nasdaq declined for 4 straight days. Gold last traded at $1,346 an ounce. Silver at $20.82 an ounce.

There are fresh signs this morning that the US job market is indeed slowing down and as a result, all three major US stock indices are down this morning.

The Bureau of Labor Statistics' JOLTS Report did not paint a pretty picture. JOLTS stands for "Job Openings and Labor Turnover Summary" and it is one leading edge measure of the employment market watched by new Fed Chair Janet Yellen.

Job openings came in at 3.974 million, below the 4.015 million most economists expected. Meanwhile, the number of layoffs and discharges rose to 1.74 million in January from a recent bottom of 1.51 million in November. In addition, there were 4.54 million hires in January, below 5.04 million when the recession started at the end of 2007, signaling that the labor market still hasn’t made up all of the ground that it lost during the downturn.

The number of people quitting jobs slipped a bit in January for the second straight month. Quitting is evidence of a vibrant job market because it shows hiring is strengthening enough for more people to leave existing positions.

Employment market trends are heading in the wrong direction with data signaling that workers’ confidence in the economy is flagging.

This is having a negative impact on the US dollar as investors are worried the US economy is once again trending toward recession.

The stock market doesn't like this news, but the stock market's problems extend far beyond today.

Markets are entering a dicey phase according to index fund pioneer and founder of The Vanguard Group, Jack Bogle.

Meanwhile, one of the world's most respected investors has raised the alarm over a looming asset price bubble, calling out "nosebleed valuations" in technology shares like Netflix and Tesla Motors and warning of the potential for a brutal correction across financial markets.

Seth Klarman, the publicity-shy head of the $27 billion Baupost Group whose investment opinions have attracted a near cult-like following, said that investors were underplaying risk and were not prepared for an end to central banks reversing a five-year experiment in ultra-loose money.

While noting that he could not predict exactly when a significant market correction would occur, Mr Klarman wrote in a private letter to clients: "When the markets reverse, everything investors thought they knew will be turned upside down and inside out. 'Buy the dips' will be replaced with 'what was I thinking?' . . .  Anyone who is poorly positioned and ill-prepared will find there's a long way to fall. Few, if any, will escape unscathed."

Finally, Irwin Kellner, MarketWatch's chief economist, lists five reasons why stocks will fall.

The first is that most stocks have already gone up an awful lot over the past five years. Last year alone, the Dow rose more than 30%! This is more than the economy has risen in total since the end of the last recession. It also beats the rise in corporate profits by a wide margin.

The second is that profit takers are already beginning to exit the market. In this environment it should be no surprise that many investors and traders have decided to take some money off the table.

Reason three is nerves. The market has been extremely volatile of late, going up a lot one day, and down about as much on the second. It’s a trader’s market, not one for the faint of heart, a.k.a. the average investor. An increase in volatility usually precedes a drop in stocks as market participants rush to get out of the way by selling en masse.

The fourth reason is the economy, which has slowed significantly since the end of last year. It does not seem that the markets are prepared for just how bad the first quarter’s growth was or how much this slowdown impacted sales and earnings.

The last is the perennial fear of geopolitical tension. In this instance, what looks to be a renewal of the Cold War between the United States and Russia.

Lots of economies in Europe and elsewhere are dependent on us and Russia for both imports and exports. A new Cold War could put the kibosh on such trade.

All of this also makes a strong case for gold, since gold has historically moved independently of stocks. That makes gold an excellent diversification vehicle to provide a degree of security and stability to a portfolio overweight in equities.

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Gold prices settled higher on short covering, bargain hunting. U.S. stocks lower on China concerns. Gold last traded at $1,341 an ounce. Silver at $20.91 an ounce.

The most important word today is DEBT.

The Bank for International Settlements reported this morning that the amount of debt globally has soared more than 40 percent to $100 trillion since the first signs of the financial crisis. All a result of a borrowing binge as governments borrowed in an attempt pull their economies out of recession and companies took advantage of record low interest rates.

U.S. government debt outstanding has surged to a record $12 trillion, up from $4.5 trillion at the end of 2007. The jump in debt is nearly twice US Gross Domestic Product, indicating a huge price to pay in an attempt to boost the economy.

There is another use of debt that is also in the news today and it has a warning for investors.

A number of warning signals are flashing in the stock market telling investors to exercise caution. Among the warnings signs: The stock indexes’ string of record highs; high levels of margin debt, or borrowings to finance stock buys; the slim number of prior bull markets that have lasted past this point; and valuations that are close to levels when stocks last peaked.

Margin debt, which tends to spike alongside stock rallies and pullbacks, has been rattling investors for months. “As that debt goes up, the market’s foundation gets shakier and shakier,” says Brad McMillan, chief investment officer for Commonwealth Financial. “The correction could be deeper.”

Also of concern is the bull market’s fifth birthday today. The average bull market only lasts about 4.5 years, putting the current one in rarefied territory. Of the 12 bull markets since World War II, only half have lasted five years, and only three have made it to their sixth birthday.

Valuations, or the prices of stocks compared to the companies’ underlying earnings, have passed levels last reached in 2007, or the top of the last bull market. Bull markets tend to expire when trailing 12-month P/E ratios get into 17x or 18x territory, says LPL Financial’s Jeff Kleintop. They’re approaching 18x now.

Another worry hitting global stock markets is China. Stock markets around the world have been falling sharply since last night on the news that China's exports in February tumbled 18.1 percent from a year earlier, official data showed, raising questions about the health of the world's second-largest economy.

It's not surprising that we're seeing more predictions of higher gold prices now.

Pictures of tanks rolling into Ukraine, continued uncertainty about the strength of the United States economic recovery and turmoil in the emerging market currencies can mean only one thing – the price of gold will increase.

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Gold prices lower on upbeat jobs report, but gain for the week. U.S. stocks higher as U.S. economy generated 175,000 jobs in February. Gold last traded at $1,338 an ounce. Silver at $20.93 an ounce.

Fresh government statistics are once again sending mixed signals regarding the US economy.

The Labor Department reported this morning that the U.S. economy added 175,000 jobs last month, marking an improvement from January and topping economists' expectations, but the unemployment rate rose to 6.7%, from 6.6% in January.

The 175,000 level is still not robust. Prior to December, the economy had been adding an average of 205,000 jobs each month. Taken over the entire past 12 month period, the average monthly increase was 189,000 jobs; so the employment picture is still in a downward trend.

The U.S. economy lost 8.7 million jobs amid the financial crisis, and as of February, only 8 million jobs had been recovered.

Once factoring in population growth, economists still estimate it will take years to get back to pre-recession health in the job market, when the unemployment rate was between 4% and 5%.

Meanwhile, long-term unemployment remains high. As of February, 3.8 million Americans were unemployed for six months or more. One key component of the employment reports paints a sobering picture. Men between the ages of 25 and 54 are in their prime working years. In February 2008, 87.4 percent of men in that demographic had jobs. Six years later, only 83.2 percent of men in that bracket are working.

This employment rate is an important indicator of the health of the labor market. This snapshot of the overall employment picture means the nation is not even halfway to a full recovery.

This is not good news for the dollar as it will add to the uncertainty about the US economy and financial markets, discouraging investment in US dollar-denominated assets.

The Commerce Department also released a report this morning. The U.S. trade deficit widened in January on a rise in imports of oil and other foreign goods.

The trade deficit increased to $39.1 billion, up 0.3 percent from December’s revised $39 billion deficit, the Commerce Department reported.

Imports rose 0.6 percent to $231.6 billion, reflecting a 9 percent jump in imports of petroleum. Imports of food and machinery also rose.

A higher trade deficit acts as a drag on economic growth because it means U.S. companies are making less overseas than their foreign competitors are earning in U.S. sales. It also serves as a drag on the value of the dollar relative to foreign currencies since more dollars are being sent overseas to foreign nations in return for imported goods. Increasing the supply of dollars tends to negatively impact its value.

One asset that has outperformed most paper assets, particularly stocks, so far in 2014 is gold. A variety of factors have contributed to this, most recently the crisis in Ukraine. Whether or not Russian troops march into Ukraine, it seems probable there will be a negative fallout from the conflict, with the possibility of sanctions disrupting trade and economic activity.

Michael Dudas, Precious Metals and Mining Analyst at Sterne Agee, says there are several reasons gold is moving higher.

Dudas believes the cause of the recent safe haven run-up in bullion will continue. He sees tensions in Ukraine as lingering, no matter what the outcome is in the near-term. He also sees a technical reason for gold to move higher.

"You have continued support of technicals," says Dudas. "You have the gold price break above its 150-day and 200-day moving averages. That's been very supportive after a multi-year decline in the metal."

Though today's employment data release may add a little bit of volatility to gold, it's the longer-term issues that Dudas believes will be more important. "As long as the gold market has discounted the taper," says Dudas, "and the Fed… continues to have zero interest rate policies for a pretty long period of time… I think that combination will continue to trade gold higher."

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Gold prices closed higher, reaching the highest settlement in more than four months. U.S. stocks higher, S&P 500 hits record. Gold last traded at $1,351 an ounce. Silver at $21.57 an ounce.

The crisis in Ukraine has taken yet another twist.

Crimea's parliament voted to join Russia on Thursday and its Moscow-backed government set a referendum on the decision in a dramatic escalation of the crisis over the Ukrainian Black Sea peninsula.

The sudden move to bring Crimea - which has an ethnic Russian majority and has effectively been seized by Russian forces - formally under Moscow's rule came as European Union leaders held an emergency summit groping for ways to pressure Russia to accept mediation.

The decision, which diplomats said could not have been made without Putin's approval, raised the stakes in the most serious east-west confrontation since the end of the Cold War.

Many in Ukraine fear the referendum move by Crimea is a pretext toward secession and the eventual annexation by the Russian Federation.

Crimea is home to both Russia and Ukraine's Black Sea fleets which are locked in a standoff with Russian vessels blockading two Ukrainian warships in Sevastopol Bay.

President Barack Obama attempted to punish the Russians and Ukrainians involved in what he called, "threatening the sovereignty and territorial integrity of Ukraine" by ordering a freeze on their U.S. assets and a ban on travel to the United States.

The names on the blacklist were not immediately made public but a U.S. official said they did not include Russian President Vladimir Putin. Obama did state that the sanctions "do not preclude further steps should the situation deteriorate."

Russian stocks fell and the ruble weakened further after the news. Moody's ratings agency said the stand-off was negative for Russia's sovereign creditworthiness.

Still, Obama seems to be having little success in getting other US allies to follow his lead in sanctioning Russia.

The European Commission has announced aid of up to 11 billion euros ($15 billion) for Ukraine over the next couple of years provided it reaches a deal with the International Monetary Fund, entailing painful reforms like ending gas subsidies.

Diplomats say the EU may condemn Russia's so far bloodless seizure of Crimea and suspend talks with Moscow on visa liberalization and economic cooperation, while threatening further measures if Putin does not accept mediation efforts soon.

The EU must tread lightly on fears of a tit-for-tat trade war with Russia, a major economic partner of Europe. France has a deal to sell warships to Russia that it, so far, has not canceled, London's banks have profited from facilitating Russian investment, and German companies have $22 billion invested in Russia.

The crisis in Ukraine began in November when Ukrainian President Viktor Yanukovich, under Russian pressure, turned his back on a trade deal with the EU and accepted a $15 billion bailout from Moscow. That prompted three months of street protests leading to the overthrow of Yanukovich on February 22.

Moscow denounced the events as an illegitimate coup and refused to recognize the new Ukrainian authorities.

Much of the financial world is still concerned about a real possibility of escalation and armed conflict in Ukraine. CNBC reports that hedge funds are making moves to provide a degree of insurance against a Russia-Ukraine conflict.

In February, the percentage of funds that purchased "deep downside" protection—a financial bet that would gain if there is a significant drop in global stocks—hit a two-year low of less than 13 percent. That spiked to more than 17 percent as of Monday, according to Credit Suisse data.

The real risk is from the likely global economic ripples in the event of more serious Russian military moves in Ukraine.

Ukraine itself is not the big issue for the financial markets, but if conflict breaks out, the whole region is plunged into a wider risk scenario. There would likely be a flight to safe haven investments, such as gold.

The crisis in Ukraine can still send the markets into a tailspin, despite Russia appearing to back away from all-out war.

The country is still on the verge of further violence. There is still unrest in plenty of Ukraine outside the Crimea, and potential for this to spread. International efforts to reach a solution so far have failed.

Even without immediate escalation, the events of this week will have countless reverberations.

Ukraine itself, while a much smaller economy than Russia, nonetheless has the potential to send prices for corn, wheat and gas rising.

Russia's powerful economic and political position in its region means any crisis which potentially impacts growth will have a broader impact. Economists are already cutting their forecasts for Russian economic growth this year.

"The situation is still highly unpredictable," economists at ratings agency Fitch warned on Thursday. They reaffirmed the country's 'BBB' credit rating, arguing that events so far did not quite justify a downgrade, but cut forecasts for GDP growth this year from 2 percent to 1.5 percent.

"If Russia goes wrong here, it will have a global effect," Richard Martin, managing director, IMA Asia, told CNBC.

In purely economic news, new orders for U.S. factory goods fell more than expected in January and shipments also slipped, adding to signs of a recent slowdown in manufacturing activity.

The Commerce Department said this morning that new orders for manufactured goods declined 0.7 percent. December's orders were also revised downward to show a 2.0 percent drop instead of the previously reported 1.5 percent fall.

In a separate report, the U.S. government sharply revised down non-farm productivity for the fourth quarter, mirroring the economy's slow growth pace in the same period.

Productivity rose at a 1.8 percent annual rate instead of the previously reported 3.2 percent pace, the Labor Department said. Productivity, which measures hourly output per worker increased at a 3.5 percent pace in the third quarter.

Economists polled by Reuters had expected fourth-quarter productivity would be revised down to a 2.5 percent rate.

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Gold prices end slightly higher on weak economic data. U.S. stocks fall on disappointing ISM data. Gold last traded at $1,340 an ounce. Silver at $21.27 an ounce.

Reality has returned to the financial markets in the form of more disappointing US economic statistics, while the dispute over Ukraine seems to have entered the economic realm.

Service industries in the U.S. expanded in February at the slowest pace in four years, reflecting a plunge in hiring that shows the biggest part of the economy is struggling.

The Institute for Supply Management’s non-manufacturing index fell to 51.6 last month, from January’s reading of 54, lower than the consensus forecast of economists surveyed by Bloomberg News and the weakest since February 2010. The median consensus estimate of economists was 53.5.

Scant momentum in the pace of hiring, limited income gains and rising mortgage rates are holding back consumers while unusually severe weather also limited retail sales and factory activity.

Also this morning, a private jobs report from ADP showed disappointing hiring results in February. Companies added fewer workers than projected in February, a sign U.S. employers are waiting for a pickup in demand before boosting headcount. The 139,000 increase in employment followed a revised 127,000 gain in January that was weaker than initially reported, the weakest two months since August-September 2012, according to the ADP Research Institute. A median consensus forecast of 39 economists expected a much more robust 155,000 advance.

All eyes will now focus on Friday's employment report, which should have a profound impact on the markets heading into the weekend.

Up to now, pundits have been blaming disappointing economic reports on harsh winter weather, but in reality, economic reports were disappointing before winter set in. It remains to be seen if conditions will improve with the spring thaw.

The past several days have introduced a new worry for the financial markets: the crisis in Ukraine. While the conflict seems to have simmered down for now, it is also entering a new phase: economic conflict.

The Obama administration and some NATO allies have talked about imposing sanctions on Russia for its aggression against Ukraine. Some in the West worry about the negative economic impact of such sanctions on Western companies doing business in and with Russia.

For his part, Russia's Vladimir Putin does not appear to be taking the threats sitting down and is making economic threats of his own.

Putin advisor Sergey Glazyev told Ria Novosti news agency that, " Russia will abandon the US dollar as a reserve currency if the United States initiates sanctions against the Russian Federation."

He went on to say that, “We will be forced to go to another currency and create our own payment and settlement system. We have a fantastic trade and economic relationship with our partners in the east and south, and we’ll find a way to not only reset our financial dependence on the US, but come out from these sanctions with an advantage for ourselves. Efforts to declare sanctions against the Russian Federation will result in the collapse of the US financial system, which will entail the end of US dominance in the world financial system.”

Much of this is bombastic rhetoric, but such threats against the US dollar must be taken seriously as it is already vulnerable with OPEC members and China talking about diversifying out of the dollar.

With the US economy teetering, the dollar is now under pressure from its economic and geopolitical flanks. Investors would do well to diversify into assets that have historically benefited from a weakening dollar, particularly gold.

But the threat to dump the dollar is not the only trump card Putin is holding. A new proposed law in the Russian duma would allow Moscow to seize Western companies' and individuals' property and accounts in the event sanctions were imposed on Russia over the Ukraine crisis.

This could be a double-edged sword. On one hand, it could hit back at the West economically should sanctions come about. On the other hand, it could also cause a rush for the exits before any talk of sanctions begins in earnest, thus backfiring on the Russians economically.

In other news, there are still more developments in the Bitcoin saga, which has seen investors bilked for millions of dollars at the hands of hackers and fraudsters.

"Poloniex", a third hacked bitcoin site, has admitted it is missing 12.3% of its assets because of a flaw in its transaction system. And to top it all off, Autumn Radtke, the CEO of an upstart bitcoin exchange, died last week under mysterious circumstances at her home in Singapore.

Radtke, the U.S.-born head of First Meta, was found dead by local police on Feb. 28, with the cause of death yet to be determined. In a statement on its website, First Meta said the company, "was shocked and saddened by the tragic loss of our friend and CEO Autumn Radtke."

As we have said repeatedly, gold is the ultimate form of real money with a 5,000 year track record as a trusted medium of exchange.

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Gold prices close lower as tensions in Ukraine ease. U.S. stocks rally, S&P closes at record high. Gold last traded at $1,337 an ounce. Silver at $21.22 an ounce.

The investment markets seem to be turning their attention away from the crisis in Ukraine for now.

The world powers seem focused on preventing the Ukrainian crisis from completely derailing the already fragile economic recovery. This desire was aided when Russian dictator Vladimir Putin ordered troops in the vicinity back into their barracks. This does not mean the crisis is over by any stretch, but it is at least interrupted.

So, now back to the reality.

Here's one harsh dose of that reality:

The stock market is in a bubble setting up for a major crash, with the Dow Jones Industrial Average likely to hit the 17,000 level within the next few weeks before plummeting to around 6,000 by 2016, author and market observer Harry S. Dent Jr. told CNBC on Monday.

"I think we will see another correction, crash, that is larger than the last one," said Dent, author of The Demographic Cliff, during an interview on Closing Bell. "I think this will be the most dangerous period in people's lives in investing."

Meanwhile, gold has been providing security and safety in 2014, having climbed 11% so far.

Global economic weakness, as well as geopolitical tensions, have prompted investors to show renewed interest in gold.

In addition to the crisis in Ukraine, there has been a less-publicized spat between China and Japan over long-disputed islands.

While such geopolitical tensions will no doubt continue to produce episodes in which gold's role as the "crisis commodity" comes to the fore, it is the underlying economic fundamentals that are producing strength in gold over the long-term, day-in, day-out.

Both the US and Chinese economies have been showing persistent signs of weakness. This has disturbed stock markets and prompted investors to diversify into alternatives, such as gold.

Perhaps most important in western markets is whether the U.S economy is still vulnerable. If, for example, the U.S. Fed taper is itself tapered, because unemployment remains stubbornly high and the economy is not seen as recovering fast enough, it would send a strong signal that recent stock market growth is vulnerable and may push more investors into gold.

Speaking of gold, we have yet another reminder it is alone the ultimate form of real money. This week bitcoin is in the news again.

Just one week after bitcoin's major exchange, Mt.Gox, went offline and then filed for bankruptcy, a bitcoin bank was forced to close after hackers stole 896 bitcoins, worth over $600,000.

The bitcoin bank Flexcoin posted a note on its site stating: "On March 2, 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. ... As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately." (The term "hot wallet" refers to bitcoins stored in an online wallet connected to the Internet)

Those looking for alternatives to man-made paper currencies would do well to remember that gold has been a trusted medium of exchange for over 5,000 years. It is an asset in its own right, not dependent on anyone's promises.

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Gold prices surge as investors search for safe assets amid global turmoil. Dow slides by triple digits as tension in Ukraine grows. Gold last traded at $1,350 an ounce. Silver at $21.74 an ounce.

For many decades, gold has been known worldwide as the "crisis commodity" and with good reason.

Historically, gold has provided a safe haven for individuals and entire civilizations during times of geopolitical turmoil.

Right now, we are seeing gold perform its traditional role as a guardian of wealth when paper assets are suffering due to world crisis.

The world is on the precipice of a such a crisis as a result of Russian military movement into the Crimea (a region in Ukraine) and threats against the Ukrainian government and defense forces.

As a result of this unanticipated situation, the price of gold is sharply higher today and world stock markets are sharply lower.

In fact, gold has now closed above $1,350 per ounce, the highest close since October.

Meanwhile, all three major US stock markets fell hard today. The Dow was down 153 points, the S&P 500 was down nearly 14 points and the NASDAQ fell over 30 points.

US stocks took their cue from Europe and Asia. European stock markets in particular felt the impact of the possibility of a major war on Europe's doorstep.

The German DAX fell 333 points, the FTSE in the UK was down 101 points and the CAC 40 in Paris fell 117 points.

Japan and Hong Kong both fell steeply as well, whereas Shanghai was actually higher overnight. This isn't surprising given that China has publicly backed Russia's moves against Ukraine.

But no market was hit harder than Russia's, which fell 11% as foreign investors rushed for the exits.

The significance of this crisis cannot be overemphasized.

Speaking to CNN, Ian Bremmer of political risk firm Eurasia Group called the crisis "the most seismic geopolitical events since 9/11."

"The threat of war, the central government in Kiev losing control over eastern regions, fear of imminent default -- these are all unnerving messages for markets," IHS Global Insight's Lilit Gevorgyan told CNN.

"This uncertainty isn't likely to dissipate soon," Rob Drijkoningen, co-head of emerging-market debt at Neuberger Berman, told the Wall Street Journal.

It should be pointed out that even if the crisis in Ukraine had not surfaced, gold could have risen sharply today, as it has most of 2014. This is because gold still has strong fundamentals, including robust global demand unrelated to the geopolitical crisis.

This is reflected in the fact that hedge funds have raised bullish gold wagers to the highest in more than 14 months amid mounting concern that the U.S. economic recovery is weakening, a factor we have been pointing out for the entire first quarter.

“There are some major concerns about the erosion of the U.S. economy,” said Jeffrey Sica, who helps oversee more than $1 billion of assets as president of Sica Wealth Management in Morristown, New Jersey. “The devaluation of currencies will continue, and it’s going to further accelerate the upside appreciation of gold. As we see more trouble out of China and emerging markets, it’s going to become more of a safe-haven investment than it’s been in the past year and a half.”

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