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Gold & Precious Metals

What Does February Stock Market Crash Mean for Gold?

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Posted by Arkadiusz Sieron, Ph.D.

on Friday, 02 March 2018 06:23

Amidst the hurricane of a plunging/soaring/plunging Stock Market Dr. Sieron reviews the facts of Gold's performance against the S&P 500, Oil, US Dollar & the Fed's inflation rate - Robert Zurrer for Money Talks

One month after the February stock market rout is an excellent time to step back and review all the facts – and their implications for the gold market. Here’s exactly what happened – and what it implies for your capital allocation.

  • After more than a year of continuously advancing, the S&P 500 fell nearly 10 percent in five days.
  • The sell-off was allegedly triggered by the surprisingly strong January jobs report, showing the acceleration in wage growth. That released fears of higher inflation, which could prompt the Fedto tighten its stance further. As President Trump rightly pointed out (on Twitter, of course):

    in the “old days,” when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down.

  • The stock market correction came on top of bond market tumble. The 10-year Treasury yield jumped from 2.72 percent on January 31 to 2.84 percent on February 2. Analysts claim that bond yields also spiked due to inflation concerns.
  • Gold didn’t offer a hedge against stock market turmoil. Instead, it shared with equities the fears against a more hawkish Fed and moved in tandem with stocks, as one can see in the chart below. The correlation between these two assets this year is about 0.6, which is pretty high.

Chart 1: Gold prices (yellow line, left axis, London P.M. Fix, in $) and S&P 500 Index (green line, right axis) from January 1, 2018 to February 28, 2018.

1-gold-sp500-1

These are facts. But what do they imply for the future? Are they changing the economic outlook? Not really. First of all, fears of inflation are clearly exacerbated. Just look what happened to the oil prices in February. It doesn’t suggest that enormous inflation is coming. And it doesn’t bode well for bullion, given the strong correlation (almost 0.6 – see also the chart below) between the yellow and black gold in 2018.

Chart 2: Gold prices (yellow line, left axis, London P.M. Fix, in $) and oil prices (black line, right axis, WTI, in $) from January 1, 2018 to February 26, 2018.



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Gold & Precious Metals

Here's What Gold is Waiting For

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Posted by Jordan Roy Byrne - The Daily Gold

on Wednesday, 28 February 2018 14:17

Jordan Roy-Bryne produces some of the best charts, today he's put together some very clear chart on the Treasury Bond market, its relationship to Gold and the Gold to Stocks ratio. Worth a look - Robert Zurrer for Money Talks

Gold was well bid during the equity correction but it could not breakout then and has retreated as equities have roared back. As a result, the Gold to stocks ratio has retraced most of its recent surge. Meanwhile, the US Dollar has rebounded and the oversold and overhated bond market could be starting a rally. The recent rise in long-term bond yields which has benefitted Gold appears due for a pause or correction. Meanwhile, Gold could also correct and consolidate as it waits for a breakout in long-term bond yields which should in turn benefit Gold. 

As we noted in One Big, Potential Catalyst for Gold in 2018, Gold is no longer trading with bonds and therefore could benefit from a big breakdown in bonds. As the chart below shows, the bond market has experienced a major breakdown. In recent days, the 5-year, 10-year and 30-year bonds all touched multi-year lows. 

02262018LTBonds

 

The breakdown in the bond market has helped Gold rally but why hasn’t Gold reached the corresponding multi-year highs?



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Gold & Precious Metals

Gold: Put Options Kill The Pain

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Posted by Morris Hubbartt - Super Force Signals

on Friday, 23 February 2018 09:18

Put options are how you protect your investments from devastation yet allow yourself to participate in all upside a market has in store. For information on how to use them well, go watch Michael Campbell's "How to Invest in Options". Just register as for Michael's Free E-Service on moneytalks.net and bingo,navigate to the Options video and watch - Robert Zurrer for Money Talks

Today's videos and charts (double click to enlarge):

SFS Key Charts & Video Update

m1



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Gold & Precious Metals

Peter Schiff on the Bond Market & Gold

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Posted by Peter Schiff - SchiffGold.com

on Wednesday, 14 February 2018 06:16

The Babylon Bee captured the current state of the Republican Party in all of its hypocritical glory. The satirical website proclaimed “Republicans announce plan to pretend to be fiscally conservative again the moment a Democrat takes office.”

The GOP said it would begin to decry deficit spending and the $20 trillion debt in order to win votes as soon as political power swung back to the opposing party.

“‘The second a Democrat is back in the White House, we will once again start yelling about fiscal responsibility,’ Speaker Paul Ryan said in an address to the House of Representatives Friday. ‘For now, we will continue to vote for unsustainable and irresponsible budgets that your children’s children’s children will pay for for centuries to come.’”

The Bee was poking fun at the budget passed by the GOP Congress last week – the budget that added some $300 billion in deficit spending and raised the mythical debt ceiling. According to the Committee for a Responsible Federal Budget, $300 billion in additional spending will ensure the annual budget deficit will exceed $1 trillion in 2019.

In his podcast Friday, Peter Schiff made the exact same point.

If you really were against the deficits when Obama was president, then why aren’t you doing something to rein them in when Trump is president? Why are you actually voting in even bigger deficits now than the ones you opposed when you were the minority? And this is all hypocrisy. I’ve said this all along – that the Republicans are only fiscal conservatives when they’re in the minority and they can’t do anything about it. But the minute you turn over government to Republicans, they can run up the debt even faster than the Democrats.”

Peter noted that the US Treasury Department plans to auction off about $1.4 trillion in Treasuries this year to finance all of this spending. That raises an interesting question: Who is going to buy all this paper? The last time the Treasury sold more than $1 trillion in bonds, the Federal Reserve was buying. Supposedly, the Fed is now in the process of shrinking its balance sheet. In fact, the Fed plans to allow billions in bonds to mature and fall off its books. That means the government will have to sell even more Treasuries to make up that difference.



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Gold & Precious Metals

Gold – Next Stop Below $1300?

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Posted by Bob Hoye & Ross Clark - Institutional Advisors

on Tuesday, 13 February 2018 06:11

February 6, 2018 

We continue to believe that gold is in the saucering stage of its eight-year cycle. The fireworks on the upside are likely a few years away, so you want to be patient, buying dips when available.

The normal action coming out of the last such six cycle bottoms was an interim high in the 55th to 64th week (58th as of January 26th). A optimum buying opportunity for bullion and the miners occurred when gold dropped to the 20-day moving average band (now $1269) and generated an oversold weekly CCI(8) of -100.

Having broken the lows of the last two weeks we could be on the way to such a correction. 

Click image to Enlarge 

bhoyye.

BOB HOYE,

INSTITUTIONAL ADVISORS

EMAIL bhoye.institutionaladvisors@telus.net

WEBSITE www.institutionaladvisors.com



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