In case you didn’t see it, gold rose and then plunged a few minutes ago, seemingly in tandem with comments from Dallas Fed chief Robert Kaplan.
Here are the bullet point highlights of his comments via Bloomberg:
- “Ironically, even though aging demographics and other headwinds should slow GDP growth, they keep rates low, and so investors are starting to get comfortable with low cap rates for real estate. Higher P/Es might be justified because we could be in this regime for an extended period of time.”
- “What I’m looking for is debt buildup associated with those high valuations”
- “A market correction or a real-estate correction is not necessarily going to create a systemic risk or slow the economy. I think it might even be healthy. But I’m looking for debt buildup associated with it”
- “I think it’s closer to the 2.5 range than it is to 3,” Kaplan says of his estimate of the so-called neutral rate of interest
Here’s the chart for gold:
And here’s Nanex with the characteristically psychedelic liquidity/volume visuals:
What did the gold algos read in Kaplan’s remarks that the equity algos missed?
Or did everyone read it just right? After all, Kaplan characterized a correction as “healthy” while simultaneously saying elevated multiples may be justified. So maybe the gold folks bought the “healthy” and sold the “justified”??
Draw your own conclusions…