Gold Price Finds Magic As U.S. Dollar And Equities Drop
New York (Jun 20) Housing starts in the U.S. totaled 1.16 million in May, above a consensus estimate of 1.15 million. Yet, down went the Dow, S&P and NASDAQ.
West Texas Intermediate crude rose 4% (at settlement, although now it is off that high a bit), while Brent North Sea oil also roared back from a rough five days. WTI is off 2.00% for the week.)
St. Louis Fed president, ultra-rate-hawk James Bullard indicated that only one more rise in interest rates would be necessary before 2018. Yes, that’s an 8. 2018. This is an enormous about face for the man with very sharp rate talons.
“We are backing off the idea that we have dogmatic certainty about where the U.S. economy is headed in the medium and longer run,” Bullard said. His overall comments now have observers calling him the most dovish FOC member after his having been the least dovish.
As contrary to common sense as this may all be, it was very good for gold today. Not quite half of gold’s vault higher was due to dollar weakness. Regular trading did the remaining work very sharply and efficiently.
Almost as odd as the action in gold and away from equities is the relative blah-ness of bullishness in the yen and a maintaining of the status quo in bonds. Both of those serve as haven plays. The power punch from gold leads us to claim once more that it is operating as an investment completely on its own. (It is also trading in tandem with oil.)
It is noteworthy that the yield on the U.S. 10-year bond, while up a few ticks today, is about 0.90% lower than it was last year at this time. That is about 35% lower than last June.
Stocks were up all over the rest of the world, with Europe displaying renewed confidence since the UK Brexit referendum now appears to be leaning toward Bre-maining in the EU on the same level as today.
As we head into the weekend, the VIX has shown weakness, meaning that the big players have already hit the door for the Hamptons and other posh points of the high-end summering world.
That quiets down the trading on all fronts.
Looking ahead to next week, we have the Brexit vote, which has been turned upside down by the murder of Member of Parliament, Jo Cox. That is the major story, period.