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Gold is in the midst of its worst two-day stretch since December. But the Commodities King isn't ready to throw in the towel just yet.
"For the moment at least, the fear of war in Russia has been alleviated. But it's not eliminated. It's just been alleviated, and it was the fear of war that sent gold prices higher in the first place," Dennis Gartman said on Tuesday's edition of "Futures Now."
According to Gartman, publisher of The Gartman Letter, only one thing matters most to gold bugs now: Vladimir Putin. The greater the tension in Ukraine, the higher gold prices should go, Gartman said. As those pressures ease, gold should fall.
(Read more: Gold ends 1% lower as stocks rally on Putin speech)
"Any incursion by the Russians into mainland Ukraine, while unlikely, but remotely possible, would send gold soaring," Gartman said.
Of course, it's been quite the year for bullion. Gold is up 13.3 percent year-to-date, and if it can hold its gains, it would be its best first-quarter performance since 1985. Gold is also on track for its best overall quarter since the third quarter of 2007.
But despite the gains, Gartman still sees some near-term gold headwinds. "Central bank policy changes are not imminent, so those concerns are not driving gold; stocks are firmer, so that is weighing upon gold prices as money moves back from gold into equities. There is no sense of rising inflation and oil prices are at best steady, and that too weighs upon gold."
Still, in the long term Gartman remains a solid bull, noting that sentiment and the technical setup are still very constructive for gold.
"The chart is going from the lower left to the upper right," said Gartman. "And in my view, that should continue for some time, and you should buy."
Gold traded to a six-month high on Friday, as investors seeking shelter from global concerns surged into the yellow metal. At this point, gold traders will be closely watching the situation in Ukraine, where a referendum in Crimea set for Sunday could determine gold's next move.
"The news in Crimea is really driving this market now," said Mihir Dange, a gold options trader with Grafite Capital. "It's obviously one of the reasons why we've rallied like we have."
The rise in gold was extended on Friday morning, when gold futures rose by about $20 in three hours, hitting a morning high of $1,388 per troy ounce.
On Sunday, a succession referendum is set to be held in the Ukrainian republic of Crimea. The vote provides a choice between two options. One is joining the Russian Federation, and the other is having greater autonomy from Ukraine as outlined by the 1992 Crimean constitution. There is no third option to maintain the status quo.
The referendum is considered unconstitutional by the interim government in Ukraine. And the leaders of the Group of Seven nations, including the United States, have said that they will not recognize the election results, noting the intimidating presence of Russian troops. But the event could have a big impact on the gold trade regardless.
"If there is some kind of resolution passed, and Russia pulls back and there's a 'Kumbaya' moment, we're going to see gold sell off precipitously. I think there's only about a 10 percent chance of that happening, but as a trader, you have to be prepared for the long shot," said Rich Ilczyszyn of iiTrader.
After a positive open, stocks suffered a sharp intraday slide on Thursday that saw the Dow Jones industrial Average drop by more than 200 points. Now traders will have to closely watch the next few sessions to learn whether the five-year bull market might finally be coming to an end, according to UBS' director of floor operations, Art Cashin.
"I don't know about the bubble bursting, but we've done some serious technical damage," Cashin said on Thursday's episode of "Futures Now." "The next several days will be absolutely critical. If we see continued weakness, you will begin to hear people talking about having put the top in."
In explaining the weakness on Thursday, Cashin turned to rumors about the volatile situation in Ukraine.
"Early in the day, when we tried to rally, the S&P ran into some very strong resistance at 1,878, 1,874. We began to pull back very slightly from there. Then the rumor wires went hot with a lot of vague rumors about Ukraine and Crimea—rumors about statements that hostility was growing nearer, further rumor about possible shots being fired. Now, none of that was confirmed, but it was enough to spook the market," Cashin said.
On Sunday, a referendum vote is scheduled to be held in Crimea, in an apparent Russian attempt to make the Ukrainian republic a part of Russia. Cashin says the fast-moving situation could end up having a big impact on financial markets, especially if it leads to sanctions against Russia.
"If they have to wind up putting in heavy sanctions, Iranian-type sanctions on Russia—which I think is unlikely—that would have very negative financial implications around the world," Cashin said. "It would hurt global growth."
A significant and surprising build in crude inventories Wednesday added more pressure to oil prices, with West Texas Intermediate futures under the key $100 level.
The U.S. Energy Information Administration said that crude oil supplies for the week ended March 7 rose by 6.2 million barrels, nearly three times what the market was expecting. In its survey and analysis, Platts called for a 2.3 million barrel build.
Tim Evans, energy futures specialist at Citigroup, says this number came in well above even the high end of estimates, which were at 4 million barrels, and surpassed last year's report for the same week (3.6) and the five-year average (4.5).
Crude prices were already trading lower ahead of the report on investor concerns over China's economy and its growth potential, after a recent string of negative data from the world's second largest oil consumer.
Traders said an additional factor impacting price volatility was an announcement from the Department of Energy that it authorized a test drawdown and sale of up to 5 million barrels of sour crude oil from the Strategic Petroleum Reserve.
Traders speculated that the test could be a proactive step by the administration over geopolitical events in Russia and Ukraine.
However in a statement, the DOE said the release is part of routine evaluation and that recent dramatic increases in domestic crude oil production have resulted in significant changes to the system that need to be assessed.
"By law, the Department of Energy is required to conduct continual evaluation of the Strategic Petroleum Reserve system's drawdown and sales procedures," said DOE spokesman Bill Gibbons.
Five years into a bull market, Byron Wien doesn't see a top in sight. In fact, the vice chairman of Blackstone Advisory Partners says that there's still plenty of time to buy stocks.
"I think the market's going to flutter around a little bit here in the first half, but I think it's going to be relatively strong in the second half, and I think this year is going to end up surprising people favorably," Wien said on Tuesday's episode of "Futures Now."
(Read more: Stocks in 'euphoria mode': Strategist)
Wien says that stocks remain reasonably valued, and continued economic growth will boost corporate earnings.
GDP growth has been "hovering around 2 percent," but a look at "early encouraging signs" like railcar loadings and bank loans convinces Wien that "the economy could head toward 3 percent. That could be very good for earnings. I think earnings have been cut too far by analysts. I think earnings are going to be better than expected."
As the earnings outlook improves, "the market is going to go higher," Wien predicted.
As the market hits record highs, the S&P 500 is also setting another, quieter record. As the final fourth-quarter earnings trickle in, S&P 500 companies have reported record aggregate earnings per share of $28.78.
And since earnings are anticipated to improve from here, the market's forward price-earnings ratio still remains below its 15-year average, despite the record-high prices.
The S&P 500 is currently trading at a forward price-per-earnings ratio of about 15.4, which is above both the five-year average of 13.2 and the 10-year average of 13.8. But over the past 15 years, the market's average P/E ratio is 16.0, according to FactSet.
"With the forward P/E still below the 15-year average and not close to the higher P/E ratios recorded in the early years of this period, one could argue that the index may still be undervalued," John Butters, senior earnings analyst at FactSet, wrote in a recent note.
For 2014, analysts expect to see earning growth of 8.8 percent. Now, it is true that analyst estimates tend to be almost strangely optimistic, especially several months out. But the stock market is still generally thought to be a leading indicator for the direction of the economy. If the actual earnings growth is close to the growth anticipated, then the stock market may not be too expensive at all.
(Read more: Either analysts are wrong, or stocks will go crazy)
As investors cheer the good news for job growth that came with the February employment report, they may be overlooking a troublesome dynamic: A tightening jobs market, in combination with rising commodity costs, could stir inflation, cutting into corporate profits and forcing the Federal Reserve to become more hawkish.
On Friday, the nonfarm payrolls measure showed an increase of 175,000 jobs in February, well above the weather-dampened expectations. And though the unemployment rate ticked up to 6.7 percent from 6.6, the broadest measure of unemployment, the U-6, dropped slightly from 12.7 percent to 12.6 percent—the lowest reading since it was at that level in November 2008.
(Read more: Chart: What's the real unemployment rate?)
Since the U-6 counts all unemployed workers, plus marginally attached workers and workers employed part-time for economic reasons, it could be a better measure of the remaining supply in the labor market. The decrease in the U-6 could thus indicate that the "slack" in the labor force—which allows companies to hire more workers without paying more—is decreasing. Once the slack is gone, wage inflation tends to follow.
"Measuring slack is not an easy thing, but an unemployment rate of 6.7 tells you there's a lot less slack than there used to be," said Peter Boockvar, chief market analyst at the Lindsey Group. "The idea that all of the people who dropped out of the labor market will magically come back just doesn't make sense—particularly for the low-end worker who is now enjoying a lot of government benefits. Therefore, the labor market is getting tighter than the Fed thinks."
As a result, "the inflation trend is going to start moving higher. It's not a single event that will happen—it's a process. But it's definitely worth watching," he said.
(Read more: Jobs report signals higher interest rates ahead)
The other factor that could contribute to this trend is the recent rise in commodity prices. The CRB commodity index, a broad measure of prices, has risen some 10 percent this year. It's at its highest level in over a year, due to tough agriculture conditions and winter weather issues that have sharply increased the prices of many commodities. More recently, the crisis in Ukraine seems to have boosted prices of commodities such as wheat and corn.
"Increasing commodity prices will drive a rise in inflation," predicted Kathy Lien, managing director of FX strategy at BK Asset Management. "It's a natural reaction to the recent growth as well as the geopolitical uncertainly that is happening in the global economy."
The S&P 500 touched a fresh all-time high on Thursday, for the third session in a row. But Russ Koesterich, BlackRock global chief investment strategist, warns that if the recent spate of weakness in economic data continues much longer, bulls will need to shift their outlook on the market.
"There definitely has been a disconnect, and I think what's helped the market move higher is that investors are giving the economy a free pass, and the assumption is that it's all about the weather," Koesterich said on Thursday's episode of "Futures Now."
"You're seeing some of the weakest economic prints we've seen in quite some time. And yeah, people aren't going to worry about it, at least not yet, because they're attributing all of that to bad weather in January and February. The challenge is, [if] we get into the spring and we're still printing this low, that's when investors will take notice."
(Read more: US factory orders drop adds to slowdown concern)
In other words, if the weather turns out to be merely a convenient excuse, then that excuse can only stretch so far.
"If you get into April, and assuming March weather is close to the historical norm, then you can't blame it on the winter," Koesterich said. If "it becomes apparent that this rebound is not happening, then people are going to have to take a second look at this market."
Payrolls have been the highest-profile concern thus far, with December and January job growth numbers coming in well below expectations. But Friday's jobs report may not provide much clarity. After all, some of the raw employment data were gathered during a stormy period, meaning that weather could take the blame once again.
(Read more: Siegel: I'm a bull, but these two things worry me)
The bad news for U.S. consumers is that food prices could soon surge alongside them. And since meat prices are especially sensitive to price changes in grains, that could be where companies and consumers feel the impact most sharply.
Corn futures for May delivery hit a six-month high on Wednesday before retreating. Similarly, wheat futures slipped on Wednesday but stayed near three-month highs. So while prices have calmed alongside the situation in Ukraine, the Russian presence in Crimea has appeared to keep a bid under the prices for these two Ukrainian exports.
The strength is "a combination of the Ukraine situation, which is worrisome, and the massive amounts of fund money looking for the home of highest net return," said Jim Bower, the president of commodity trading company Bower Trading.
"Funds are making a big push into commodities here, especially wheat. Funds were heavily short, and they decided, 'Maybe we don't need that position anymore.' That forced them to short cover. And now they may start to go long."
(Read more: Dennis Gartman: If you buy one thing, buy this)
Ukraine is the world's sixth-largest wheat exporter, and fourth-largest corn exporter. So far, shipments have not been disrupted. But the concern is that if the situation deteriorates, they will be.
"Ukraine is a major exporter, and Russia-Ukraine is one of just four or three exporting regions in the world," said Jonathan Feeney, food and beverage analyst at Janney Montgomery Scott. "When any of those regions feels political tension, and perhaps an inability to complete foreign trade, the market's going to feel it."
If the recent rise is sustained, Feeney expects to see it reflected in food costs in about six months' time.
"Between hedging and the time it takes to source, six months is a good estimate," Feeney said. "Of course, you have to see what the weighted average is going to be over the next to two to three months. I don't think [food companies] yet have the cover to say, 'OK, let's take the price increase to retail. So we'll wait and see.' "
(Read more: Ukraine turmoil: Is this the worst-hit commodity?)
Jeremy Siegel is one of the most famous market bulls, and he reiterated his positive take on Tuesday with a call for the Dow Jones Industrial Average to rise to 18,000. But he also mentioned two things that worry him right now: a potential lack of slack in the labor force, and commodity prices.
(Read more: We're only in the bull market's 4th inning: Siegel)
Siegel, a Wharton professor of finance, said on Tuesday's episode of "Futures Now" that a sharp rise in commodity costs could change his take entirely.
"If I saw commodities really increasing in price—I mean, we've had a little bump in oil, we know why we had that yesterday, with the threat of war, and shutoffs of supply, and embargoes against Russia—but anything that sparks any inflation at all" is a serious concern, Siegel said.
(Read more: Ukraine tensions boost oil but resistance is strong)
"The commodity prices have been holding up better than I would think given the slowness in the economy. But if that started flaring up, not only is taper going to be maintained—it could be accelerated by the Fed," Siegel said.
The issue is that the Federal Reserve's quantitative easing program, and its ultralow federal funds rate, both depend on low inflation. If rising energy prices suddenly spur inflation, then the Fed could be forced to pull back, potentially causing interest rates to spike and thus hurting the market.
"If we see some of these commodity prices rise up the way we did yesterday to continue to rise up," then the Fed is "going to be geared" to cut back on quantitative easing and increase the federal funds rate.
For that reason, rising commodity prices "would be a concern for me," Siegel said.
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