DAILY MARKET REPORT
Gold surged at the COMEX open this morning – up $11 at $1225. Silver is up 10¢ at $14.40. We detect two principal factors driving today’s trading. One is ominous and clear-cut – UK’s Brexit woes. The other is less concrete but probably more influential in the marketplace – guarded comments from Fed chairman Powell that came off as an early warning that a change of direction might be brewing at the Fed on interest rates. Suddenly the possibility of a “pause” has entered market thinking. Adding to the “pause” argument, CNBC ran a blazing headline this morning: “Cramer says CEOs are telling him off the record the economy has quickly cooled.” Such anecdotal evidence might be what was behind Powell’s remarks two days ago.
As we mentioned yesterday, the unfolding Fed scenario might serve as incentive for traders to begin squaring the enormous short position at the COMEX which requires buying gold contracts as an offset. With a shaky weekend ahead of us, the prudent course of action might be to buy today.
Quote of the Day
“I remember being told many years ago on a South African game reserve that the buffalo was the most dangerous of the big five game animals. In large part, this is because of the complacency shown towards them relative to the other, more obviously dangerous big five game animals (ie the lion, leopard, rhino and elephant). It’s also a fact that unlike the other big five, the buffalo gives no warning of an imminent charge (see link). It’s complacency that gets you killed, and the same goes for investors with the macro-risks. We all know what the big macro-imbalances are out there, caused by years of loose money, but investors continue to ignore them at their peril.” – Albert Edwards, SocGen
Chart of the Day
Chart note: This interactive chart from the St. Louis Federal Reserve shows the average annual price of gold from 1970 through the present. It demonstrates at a glance gold’s strong performance as a portfolio holding over the long haul and emphasizes its role as a reliable long-term portfolio safe haven.