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Market Morning: Gold Awakens, More Iran Sanctions, Bitcoin Breaks Through, McDonald’s Goes Robots
Gold Wakes Up, Media Wakes Up To Gold
Gold (NYSEARCA:GLD) is on the move, now above $1,400 an ounce for the first time since August 2013. Mainstream media is starting to pay more attention to the metal now, but still seems to keep to the basic script that gold goes up in times of uncertainty. “Gold has historically been a pocket of strength in periods where uncertainty increases sharply,” said CFRA investment strategist Lindsey Bell, quoted by CNN. Investors often flock to gold as a safe haven in times of increased volatility, CNN explains. The problem with these explanations are that they are simply untrue, but nobody seems to challenge them. The vast majority of the last bull market in gold, which began in 2001, occurred during the 2002-2007 bull market in stocks. This was not a period of volatility or uncertainty. Gold quadrupled over the time period from 2001 to 2008 after breaching $1,000 for the first time ever. It has now been basing for 10 years, after retracing a little less than 50% of its previous bull market.
Trump Administration Rescue Iran From Trade Imbalances…Through Sanctions
Meanwhile, the Trump Administration is looking to support the gold price, and help balance Iranian international trade. After calling off a military strike against Iran over the weekend and for some reason publicizing this story, President Trump has instead decided to increase economic sanctions against Iran, which probably won’t make them any happier or willing to cooperate with whatever Trump wants them to cooperate about. The sanctions path, apparently is called the “diplomatic path” even though sanctions mean ringing a country and preventing imports from crossing, sort of like tariffs except it’s a move against another country rather than your own country. In that sense, perhaps Trump is trying to help Iran by balancing its trade deficit through sanctions. Meanwhile, Iran is already undergoing hyperinflation, with an annual inflation rate of 52%.
OPEC Meet Next Week Critical for Oil Prices
The Organization of Petroleum Exporting Countries is meeting next week in what could help determine oil’s (NYSEARCA:USO) trajectory over the next few months. The cartel is aware that the world is expecting them to uphold the current production cut structure and perhaps even clamp down the pumps even harder as the Saudis try to prop up the oil price in preparation for yet another IPO attempt for Saudi Aramco, the most profitable company in the world, but not profitable enough for the appetites of Mohamed Bin Salman, Crown Prince of Saudi Arabia. Arguments could be made either way regarding the bullishness or bearishness of the continued trade war between the US and China on oil prices, bullish because it should push up consumer price inflation, which tends to bring oil prices up, and bearish because a weaker economy could push down the demand for oil. The dollar’s direction (NYSEARCA:UUP) should help determine which way oil is going to go assuming that OPEC keeps up with market expectations.
Bitcoin Bear Market Rally Continues
Bitcoin’s (BTC-USD) bear market rally continues over this weekend with prices breaching the $11,000 mark, and Ethereum (ETH-USD) breaching $300 for the first time in about a year. Trading volume in Ethereum and Bitcoin have reached all time highs since the current rally began last December. The next resistance zone for Bitcoin is around $11,500, and after that, there is no significant resistance until about $17,500, and then all time highs. So far though, this continues to be a bear market rally, until new highs are breached.
McDonald’s Battles Minimum Wage
With robots. McDonald’s (NYSE:MCD) branches in Chicago are testing out the ability of automatic fryers and voice activated drive-throughs to take over from people, to, in their words “help increase production and shorten wait times” when in reality, it’s probably spurred on by higher minimum wage legislation and McDonald’s is trying primarily to save money. Employees are staring walkouts over these things, claiming that robots are going to take their jobs, which only becomes more probable if they walk out, as robots don’t have the ability to do this, making them easier to manage. Watch out for new legislation against automation, which, if it were a road taken in the 19th century, would have outlawed the industrial revolution, meaning many of these people now walking out of their jobs would never have existed in the first place.
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