|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||116.24 - 116.71|
|52 Week Range||115.12 - 129.51|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.40%|
Fresh Sell-Off Hits Gold: Is $1,200 the Next Stop? Investors, market participants, and analysts have been puzzled by gold’s weakness in recent months despite escalating trade war tensions and geopolitical risks. The Fed’s aggressive stance on interest rate hikes has also been weighing on gold.
Many investors might seek to buy gold at a discounted price while some risk aggressive investors want to short gold for the near term via ETFs.
In an interview with CNBC on July 19, President Trump said that he wasn’t “thrilled” about the Fed raising the rates. He said, “Because we go up and every time you go up they want to raise rates again. I don’t really — I am not happy about it. But at the same time I’m letting them do what they feel is best.” Usually, presidents don’t interfere or comment on the Fed’s decisions. The market knows President Trump’s views on interest rates.
Fresh Sell-Off Hits Gold: Is $1,200 the Next Stop? In the previous part, we discussed how gold prices lost ~1% following Fed Chair Jerome Powell’s strong outlook for US economic growth and his conviction in the gradual rate hike path. Gold fell ~0.43% on July 19 and ended the day at $1,218 per ounce.
Gold prices (IAU) have been on a losing spree since mid-April due to the US dollar’s strength and diverging monetary policies in the United States (IVV) and the rest of the world. During the congressional testimony, Fed Chair Jerome Powell gave an upbeat assessment of the US (VOO) economy. The assets are attractive when interest rates (TLT) are high because gold doesn’t generate any income.
Crude oil traded with increased volatility and mixed sentiment on Thursday. On July 20, crude oil opened on a stronger note and was trading with strength in the early hours.
After losing strength last week, crude oil started this week on a weaker note and declined as the week progressed. On Thursday, crude oil started the day on a mixed note and was trading with weakness at four-week low price levels in the early hours.
Gold prices have declined ~5.0% YTD (year-to-date) after rising ~13.0% in 2017. Gold is hitting lows despite factors that favor its safe-haven status. Despite the escalation of trade war fears and political tensions in the European Union, gold prices have been trending lower.
A record number of fund managers in the BAML (Bank of America Merrill Lynch) July survey believe that gold (GLD) (IAU) is undervalued. About 17% of them said gold was trading below its actual market worth, and 25% said oil (USO) is overvalued.
Gold prices early Thursday extended a downdraft that has pushed the metal toward its lowest close in more than a year, in an atmosphere of rising benchmark rates for U.S. government debt and the continuation of a U.S. dollar rally. August gold traded $12, or 1%, lower at $1,215.90 an ounce early Thursday, a day after the precious commodity edged up slightly to register its first gain in four sessions and avoided its first finish in correction territory, defined as a decline from a recent peak of at least 10%, since late 2016, according to WSJ Market Data Group. Gold tends to fall as stocks climb because it is viewed as an asset that appeals to investors in times of uncertainty and fear.
Stock Futures Down, Gold Hits New Lows, Dollar Up Futures are down this morning, modestly, with the S&P 500 futures (NYSEARCA:SPY) falling around 0.2%, oil (NYSEARCA:USO) down on reports of record US output, most currencies down against the US dollar (NYSEARCA:UUP), and gold (NYSEARCA:GLD) hitting new 52-week lows, though just by a week. Gold hit […] The post Market Morning: Gold Collapses, Yuan Plummets, MGM Flies High, AT&T Faces Off Justice Dept appeared first on Market Exclusive.
While fund managers are bullish on US equities (SPY), there is still no lack of concern. In the BAML (Bank of America Merrill Lynch) July 2018 survey, for the third month in the last five months, trade war concerns were cited as the top concern of global fund managers. A total of 60% of the fund managers surveyed cited the trade war risk as the top tail risk.
In the previous part of this series, we saw that fund managers have turned more positive on equities in the United States. According to a BAML (Bank of America Merrill Lynch) survey in July, FAANG plus BAT was identified as the most crowded trade for the sixth consecutive month, cited by 53% of respondents. BAML also said that this was the most crowded trade since the long US dollar in 2015.
A net -11% of respondents in the BAML (Bank of America Merrill Lynch) July survey expect faster economic growth over the next 12 months, which is the lowest since February 2016. At the start of 2018, a net 40% of polled fund managers expected faster economic growth in the next year. While it is very difficult to pinpoint a turning point in the economic cycle, the consensus is generally growing that we are in the late stage of the economic cycle, which typically precedes a recession.
Following a weak performance last week, crude oil started this week on a weaker note and declined in the first two trading days. Carrying forward the sentiment, crude oil opened lower on Wednesday and was trading with weakness at three-week low price levels in the early hours.
After declining for two consecutive trading weeks, crude oil started this week on a weaker note by declining to three-week low price levels on Monday. Carrying forward the weakness, crude oil opened lower on July 17. Crude oil was trading with mixed sentiment in the early hours.
Although US steel prices and physical aluminum premiums have spiked this year after the Section 232 tariffs, metal prices have been largely subdued. Recently, seaborne iron ore prices fell to a multi-month low. Aluminum, zinc, and copper have also come under pressure amid concerns about the US-China trade war. Gold (GLD), which is generally seen as a safe-haven asset, has also been subdued. However, energy prices (XLE) have shown strength amid supply-side concerns due to looming Iran sanctions.
Crude oil lost strength last week and declined for the second consecutive trading week. Carrying forward the weakness, crude oil opened lower on July 16. In the early hours on Monday, crude oil was trading with weakness at three-week low price levels.
After pulling back last week, crude oil started this week on a stable note and declined as the week progressed. Following a weak performance for two days, crude oil started Friday on a weaker note and declined to three-week low price levels in the early hours.
In the preceding parts of this series, we discussed how gold prices have remained weaker despite escalating trade war fears and geopolitical tensions. Many of these risks stem from the ongoing trade spats, which would create inflationary (TIP) pressures in the economy apart from uncertainty. Gold (GLD) is often seen as an inflation hedge.
The CFTC (Commodity Futures Trading Commission) reports the position of major players in the futures market through its COT (Commitment of Traders) report. According to the COT report for the week ended June 26, 2018, money managers were barely net long on gold with just over 4,000 net speculative long contracts. According to Commerzbank, “Short positions, in particular, were built up, which means speculative financial investors are currently betting heavily on falling prices.” For the week ended June 3, money managers kept their positions almost unchanged, which implies the lowest levels of net long positioning since late 2015 when gold prices dipped below $1,050 per ounce.
On June 23, 2016, the world was caught by surprise when British citizens voted to leave the European Union (HEDJ) (VGK). Currency and equity markets were in turmoil as a result of the exit decision, while safe-haven assets including the US dollar, the Japanese yen, and gold surged. After almost two years, the uncertainty related to Brexit could again come in as a support for gold and other precious metals.
As we’ve discussed previously in this series, the escalating trade tensions haven’t been able to support gold much in 2018 mainly due to the simultaneous appreciation in the US dollar (USDU), which has capped gold’s gains. While the index for current conditions came in as expected, the sentiment over future business conditions and income prospects declined. Investors should note that consumer spending (XLY) constitutes more than two-thirds of the US economy.
The US non-farm payroll figure for June improved at a marginally slower rate than in May. In June, 213,000 jobs were added compared to 244,000 in May. The data for June, however, beat the market expectation of 195,000 job additions. The broader market S&P 500 Index (SPY), the Dow Jones Industrial Average Index (DIA), and the NASDAQ Composite Index (QQQ) rose 0.85%, 0.41%, and 1.34%, respectively, on Friday, July 6, after the announcement of the non-farm payroll report. The US unemployment rate threw a surprise for June as it grew to 4.0% from 3.8% a month earlier.