Here's why Lindsey Group Chief Market Analyst Peter Boockvar says gold is heading higher. » Read More
The central banks of Russia, Kazakhstan and Azerbaijan all boosted their gold purchases in April, according to a report on Monday from the International Monetary Fund.
Together, the three countries bought up some 24,125 pounds of gold in the month. And as a whole, central bank net purchases contributed to more than 11 percent of the demand for gold in the first quarter of 2013, according to the World Gold Council.
So can the central banks save gold?
"I don't think that central bank buying is going to actually stop this decline in gold," said Kathy Lien of BK Asset Management. That said, central bank purchases "are certainly stemming the slide, and gold would probably be closer to $1,200 if it wasn't for this demand by central banks."
So why doesn't she think those same purchases can save gold?
"You've consistently seen central banks increase their purchases over the last couple months," Lien said on Tuesday's episode of "Futures Now," "and yet you've still seen gold prices fall."
Municipal bonds face trouble ahead that one expert compares to lava flowing from a volcano—that will ooze into the fixed-income sector.
The $3.4 trillion muni industry faces a multitude of threats, ranging from the high-profile financial problems of big cities to tax challenges resulting from Washington budget negotiations.
Consequently, Marilyn Cohen, president of Envision Capital Management, is advising clients to take the unusual step of buying high and selling low.
"That is, only buy high quality municipal bonds and sell the low-quality munis you own," Cohen advises in the most recent edition of her Bond Smart Investing newsletter.
(Read More: Buffett: Right Now, Stocks Are Good, Bonds Are Bad)
The guidance comes from a view that the higher-risk bonds that investors bought in a quest for yield will come back to haunt them as municipal financial pressures mount.
"The great American municipal bond restructuring is selectively in process—like a slow lava flow," Cohen said. "Run away and sell those issues that may scorch your portfolio."
Among the biggest targets are Detroit; Stockton and San Bernardino, Calif.; and Chicago; as well as Puerto Rico. Each has struggled with moderate to severe difficulties. Detroit teeters on bankruptcy, and Chicago has one of the slowest growing city economies in the country. San Bernardino has filed for bankruptcy protection, and Stockton is eligible to do so.
(Read More: Bearish Like Buffett? Some Bonds May Still Be King)
"The sound and fury, posturing and bluffing may appear a bit different in each case, but the subliminal outcome is the same: bondholders must share in the pain and take a haircut," Cohen said. "Like a lava flow, taking a haircut on your municipal bonds—even one position— is destructive. But like a lava flow, casualties should be rare because the information and process is slow enough to allow escape."
The muni market survived a scare in 2010, when banking analyst Meredith Whitney famously predicted widespread calamity and dozens of huge defaults that never materialized. Munis went on to perform superbly but have slowed recently.
The Barclays Municipal Bond Index is up 1.4 percent for the year, worse than even the 1.52 percent return from Treasurys and well below the 8 percent return of the Barclays Composite Index.
Mutual funds focusing on munis have taken in $8.34 billion this year but have lost more than $1 billion over the past six weeks, according to the Investment Company Institute.
In addition, munis face political obstacles in Washington. Congress is toying with capping municipal tax deductions at 28 percent, which critics say would be harsh on the industry and the governments that use the bonds to fund their operations.
Threats of removing the tax-exempt strategy had previously not been taken seriously, but they are now.
"State and local government issuers are facing a clear and present danger that the IRS code relating to the tax exemption will be changed so as to make financing more costly," Citigroup muni analyst George Friedlander said in a research note. "The timing of any such change is uncertain."
Friedlander said, however, that the move probably wouldn't take effect until late this year or 2014.
(Read More: Assessing Just How Much Bond Investors Lost)
But he said the damage would be substantial, because the government is relying on inaccurate models to project the actual costs.
"The costs of such changes to issuers appear to be severely understated relative to potential benefits to the federal government, because they rely upon a flawed model for assessing the cost of the tax exemption and for assessing how changes in the tax exemption would affect borrowing costs," Friedlander said.
Cohen also expressed concern about the tax problem.
"There's enough municipal bond consternation going on that you can't control," she said.
Crude oil continues to be a tremendously volatile trade, and it has presented traders with a plethora of opportunities.
In May, oil has certainly fluctuated inside of the current $91.50 to $97 band. On some days, WTI crude correlates to equities, and on others, the quantitative easing undercurrents seem to dominate. We are flush with supply domestically, but Middle East tensions still exist under the surface—producing somewhat of a tug-of-war.
We are focusing on equities holding this week's lows, as crude would indeed follow the S&P 500 lower on a violation. That could potentially break us out of this May range. However, until we see confirmation of an equity correction, we want to buy the low end of this range and sell the top of it. Of course, it is important to use tight stops—sentiment can turn on a dime, as we have seen this week.
(Read More: Oil Prices, Dollar May Set Off on New Relationship)
So which way is crude likely to break?
Due to the fact that $97 has served has strong resistance (it has been tested five times this month alone), we feel the price will breakout of the range to the downside before it breaks to the upside. For that reason, getting short on stops under the range is the way we'd like to play crude oil today.
Gold isn't trading like a safe haven—it's trading like a currency.
Gold retested major resistance on Thursday night, reaching $1,397.10 before falling back. The market was able to recover from pullbacks earlier Thursday to close back above $1,383.90. But early Friday trading finds gold getting back to this level from the highs.
We have been looking at a chart that discounts the quick move through the $1,411.70 retracement level up to $1,413.10, and this shows a market that has now tested resistance at $1,397 four times and has failed (and fallen back at least $10) each time. Traders have had a tremendous opportunity hedging longs as well as selling outright against this level.
Our level of support at $1,375 held very well Thursday, and a retest Friday will be very negative to the bull camp. However, the line in the sand is the support ranges from $1,464 to $1,467.70. If the market breaks this level, expect to see gold close at the lowest level in more than two weeks, which will put the bears in complete control. A close above major support at $1,380 to $1,383.90 will likely keep the market neutral to the slightest bit positive into the weekend.
The reality is that there is no imminent catalyst to help this market follow through. Recently, as the Japanese yen has moved lower, so has gold. The yen is positive against the U.S. dollar on Friday, but is still trading far from the highs (just as gold has fallen back). If the yen can climb back, you should expect gold to follow through to $1,400. Yes, this means that gold traders should also gauge the dollar, which is trading one point from this week's new swing high at $83.50. If the Dollar Index can climb back above 84, the yen should press lower and so should gold.
Due to technical difficulties that we experienced today, we were unable to stream "Futures Now" live. Our apologies for the inconvenience.
However, all of the video clips from the show, as well as the video of the full show, will be available on demand. You can find them on this site shortly.
"We're moving toward an ah-ha moment in the market where people begin to realize that these bouts of QE over four years have not produced escape velocity in the domestic economy," he said. "The domestic economy is not self-sustaining. Wealth in the stock market is not trickling down. And we saw flat revenues in the first quarter. Yes, earnings were up 3½ percent, but half of that was from buybacks. There's an artificiality in both bond prices and stock prices."
Kass said that he had misjudged the effect of quantitative easing by the world's central banks.
"I underestimated the impact that global monetary easing would have and that there were few alternatives to equities," he said.
Bond yields have surged in the month of May. So just how much have retail investors lost?
Almost five years.
On July 25, 2012, the 10-Year Treasury yield hit a low of 1.38 percent. And on Wednesday, yields finished the day just shy of 2.04 percent, as investors became concerned that the Federal Reserve will taper quantitative easing sooner than previously expected.
(Read More: Fed Mulls Tapering as Soon as June: Minutes)
That huge move in yields translates into a gigantic difference in how long it takes bond investors to get their money back. To make up for this jump in yields, bondholders would theoretically have to hold their bonds for 4.8 years longer to make the same amount of money that they would receive if they bought bonds today.
Worse, if bond yields continue to rise on the theory that the Federal Reserve is about to taper its bond purchases, then those who bought bonds at the bottom will be missing out on more and more money. Adding insult to injury, the S&P 500 has appreciated by 24 percent since then.
As Federal Reserve Chairman Ben Bernanke testified before Congress, yields on 10-Year Treasurys touched two percent for the first time since March. This as investors became nervous that the Fed could wind down their bond-buying program sooner than expected. Of course, this also has the potential to negatively impact the stock market.
All eyes are on the Federal Reserve.
Gold's choppy overnight trade kept the metal above $1,380, and it rallied to $1,388 shortly after midnight. Traders will be tuning into Fed Chairman Ben Bernanke's testimony in Congress on Wednesday morning for any clues about the bank's bond purchasing program.
Additionally, the Federal Open Market Committee Meeting minutes will be released in the afternoon, and traders again will be looking closely. The big question is when the Fed will stop or taper quantitative easing.
(Read More: Hilsenrath: Here's What Bernanke Will Say)
With Consumer Confidence at the highest levels in years, and the equity market continuing to rise, gold has taken a back seat as investors flock to more attractive investments. The metal was able to trade well off the lows it put in on Sunday night, but gold has been capped at $1,400. Only a close above $1,404 will be able to signal a potential bottom in this market.
In a hearing starting at 10 a.m. EDT, Federal Reserve Chairman Ben Bernanke will go before the Joint Economic Committee to give his outlook on the U.S. economy. But what investors will really be listening out for is what Bernanke says about when quantitative easing will end.
However, according to The Wall Street Journal's chief economics correspondent, Jon Hilsenrath, the chairman's testimony could be hamstrung by disagreement within the Fed.
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