Comment: Dollar index is down now

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Dollar index is down now

I don't think funds would be expected to flow into 10 year Treasury notes in a safe haven trade because of the threat of default. That seems counter-intuitive since a default would make Treasury notes worthless.

The gold and silver trade is likely driven by short covering as the speculators who made money on the down trend from Spring to the seasonal Summer low turn their positions around to take advantage of the likely seasonal uptrend through the Fall and Winter. The debt ceiling debate could well provide the spark that ignites the rally in Precious Metals on a safe haven bid.

As far as why the Treasury Notes being bid up today, I think that could be related to speculation about the Fed minutes that are set to be released on Wednesday. The market could be bracing itself for a further dampering of tapering expectations. If the market starts to expect the Fed to hold off on tapering further then that could cause an unwind of the tapering trade that has led to the recent spike in rates. I also think the market doesn't expect a default since the Treasury will obviously pay the interest on any debts first before paying for anything else so today's price action could also be reflective of that attitude.

As far as the US dollar I think that it is likely react negatively to the debacle in Congress, and the sell off in the dollar today is probably also reflective of a dampering in tapering expectations.