Gold surged to a six-month high on Wednesday as investor angst grows amid the ongoing rout in U.S. stocks and seemingly endless stalemate inside the Beltway.
Want to see a poignant visual? Have a look at this:
(Bloomberg)
That’s “fear”. Gold is having its best month since January 2017, while the S&P is having its worst December on record and gold ETF holdings (blue line) are surging.
It’s worth mentioning that gold is performing despite a steady dollar, still stretched dollar longs and, most notably, generally steady real yields.
(Bloomberg)
I guess the whole “inverse real yields play” doesn’t apply late in the hiking cycle when, to quote the President, “the outside world is blowing up around us”.
Don’t forget the following chart from Goldman (this is from a December 3 note):
(Goldman)
And oh, the irony. After all, if there’s anyone who likes gold, it’s Donald Trump.
Something tells me this is one time when he wishes the yellow metal wasn’t shining quite as brightly.
Alternative opportunities are offering not much upside now. Cash 2.40% gold 1275. Bonds 2.70%. I think some investors will switch into stocks soon. Earning season starts on the last week of January, they will anticipate and realize that a slowdown in profit growth doesn’t mean a drop in profits. Not calling a monster rally, but a 10-15% rise to 2600/50 in spx could develop in the next 1-2 months. If it keeps dropping it means there is something rotten somewhere and we will know later.
There will be a lot of caution in CEO and CFO comments. And I expect a surge in layoffs as mgmt looks to cut cost. On the flip side it seems more likely a trade deal with China will be reached unless the political animal in the Oval Office just wants the issue BUT he must understand the trade war is hurting his reelection chances unless he really is totally self destructive. Reading that no wonder why stocks can’t catch a bid.
Steve Bannon said he wanted to change the Republican Party and he has. The result is this chaos with the reverberations to come for many years. This opens the door to Dems who love more taxes and more regulations and a further move left possibly into socialism. So it makes sense that gold is getting a bid but even that will not save us from a bankrupted future. But Steve will do well as many wil be angry. What a legacy Delusional Don is going to leave. Sad!!!!
Just a couple of notes regarding your comments: #1, Bannon did not change the Repub party, he helped expose it for what it has always been. #2, Dems don’t love more taxes. Members of Dem party are normal civilized citizens who dread tax day and hate to see increases. #3, Dems respect regulations that protect our earth and world for future generations; maintain clean air and water; keep national parks from being taken away and used for private enterprise; protect wild animals from becoming extinct due to game hunters for their ‘sport’ of killing them; require agriculture growth to be protected from poisons; develop necessary food safety programs; and control prescription medication usage. Regulations benefit all life forms. Trump and his kind only disapprove of regulations because it costs them more money to obey them!
And #4, we will all be lucky if trump alone will not bankrupt America because of his incompetency AND Bannon has already outlived his claim to fame and is a “has been” now. Delusional Don and his admiring limited crowd of citizens and fellow governing clowns will forever be responsible for this shameful legacy in American history.
Gold is in the eye of the beholder. its a fear trade, its a hedge against inflation, it goes up with a general rise inthe economy, it moves opposite of interest rates etc etc. there are many studies of the long term relationships of golds most common ‘purposes’, and the only one that stands out over the medium and long term is vs the $. yes, its a LONG term inflation hedge….under all other time frames the fit is very weak and also for its other purposes like ‘fear’. heck the $ is a hedge against ‘fear’. my friends from s america, see the $ AS gold.