- The S&P 500 - Look for a top in this stock index. Currently it is in full bull mode with a perception that trade tensions with China are not as bad as feared. As mentioned above, a 470 market-day downtrend is tough to reverse. [see Chart to Watch below].
- Interest Rates & Inflation - The 10-year moved aggressively above 3% this week. U.S. interest rates are on the rise again putting more pressure on precious metals. The FOMC is also expected to raise the Fed funds rate next week. Fortunately for gold, 10-year inflation expectations concurrently broke to the upside from a consolidating pattern Wednesday. Presently 10-year real rates are at 0.91% - are we near a top?. Inflation keeping pace with rising rates can soften this bearish factor. [see Inflation Expectation Chart below]
- The Chinese Yuan - The Chinese announced this week that yuan devaluation will not be used as a tool in the trade war. Gold has demonstrated a stunning correlation with the Chinese currency since April. The yuan has stabilized near 6.85 USDCNY which should be a moderating influence for gold since the two have weakened and strengthened in lock-step.
- Rising Commodities - Gold took a beating from rising commodities this week. It lost considerable value to copper which bounced nearly 7%; and oil, up 3%. Compared to the broader Bloomberg Commodity Index (BCOM), gold is down 3%. Gold fares better when it follows commodities higher. [see Weekly Summary Chart]
Weekly Summary for September 21, 2018 AM
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Colonel Possum & Mariana