Weakness in the U.S. dollar is pushing the markets around today, and gold is especially benefiting. In mid-afternoon trade, gold is up around $12.00 of which almost $10.00 is due to the sagging dollar.

Markets got off to a shaky start Monday with no financial instrument really holding sway – at least not on the positive side.

It is hard to discern whether this is just a case of Monday blahs exacerbated August vacation schedules or a reaction to collapsing oil prices.

We are also eagerly awaiting the July labor report due out this Friday. More on that as the week progresses.

The U.S. dollar was softened by data that reporter GDP in the second quarter only grew at 1.2% against expectations that it was going to grow by 2.6%.

A second dinger came in the form of a puzzling drop-back-five-yards-and-punt move by the Bank of Japan.

The price of crude oil declined to its lowest level in three months as stockpiles build and production sails ahead with no regard for market forces. (Although that is approach can be complicated. Pumping more maybe a strategic hedge and part of a waiting game betting prices will eventually rise.)

The opening paragraph of the FOMC’s press release says it all. Our italics indicate the highlights:

“Information received since the Federal Open Market Committee met in June indicates that the labor market strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June following weak growth in May.

The yen popped in relation to the U.S. dollar today as it seems a given that the Federal Reserve will vote tomorrow to leave interest rates alone for the time being. The Japanese currency was up 1.00% in mid-afternoon trading.

Anyone dreading the Fed’s potential actions come Wednesday afternoon when its two-day meeting ends will find reason to head to the sidelines today and tomorrow, staying there till the statement is released.

As it becomes more apparent that the Japanese central bank will vigorously stimulate Japan’s economy, the yen continues to weaken and the U.S. dollar strengthens.

Stocks were looking for an excuse to fall back and they found one in weaker crude prices, which weighed on U.S. markets.

Gold took advantage, rising over $16 with $13.50 accounted for by regular trading. The rest was due to dollar weakness. Silver picked up 2.00% or 41 cents on the day and both platinum and palladium were strong. Palladium bumped up about 2.00%.

As the saying goes, “There’s no fighting city hall.” For gold, we can extrapolate by saying, “There is no fighting economic strength in the U.S. economy.”

Gold fell by $16.40 an ounce, the preponderance of which came via regular trading, although a stronger dollar slightly helped push down the yellow metal. The loss was around 1.25%.