Gold futures back above $2k!!

MARKETS

The US dollar tended to the downside again on Monday, with small losses in the dollar index leaving it just above 2-year lows. EUR/USD rose but fell short of 1.19, while GBP/USD managed a close back above 1.31 and USDJPY slid back to 106.
Gold benefitted from the dollar weakness as well as the news that Warren Buffet had acquired a stake in Barrick Gold, the world’s second biggest gold miner. Gold futures rose back above $2000 per oz, while spot gold remained just short of the key level. Crude oil had a good day on reports China will increase its imports of US oil as part of the US China trade deal.

Shares in China shot higher following a liquidity injection from the PBOC of 900 billion yuan ($100 billion) into the banking system. Wall Street was mixed with the S&P up but short of a record high while the Dow finished lower as tech shares gained but cyclicals underperformed.

GURU WISDOM

“Fear incites human action far more urgently than does the impressive weight of historical evidence.” – Jeremy Siegel
 

Gold 2k

The $2000 round number is a key level to watch for any resumption of last week’s sell-off. The level could see short-term buyers exit and sellers who missed the first drop sell the bounce. 

Famed gold bug Peter Schiff commented that ‘historically big corrections have been a normal feature of gold bull runs’. His point being that the biggest daily price moves in bull markets are always counter to the trend, i.e. down. A close back above $2000 in spot gold would be some confirmation that Tuesday’s big drop was a ‘flash in the pan’.
 

China buys oil

The price of oil jumped on Tuesday, breaking a streak of very low volatility trading. WTI rose over 2% after US officials confirmed China was making the necessary agricultural and energy purchases from the phase one trade deal. Additionally, OPEC+ producers reportedly met quotas with a 97% compliance rate. The reports come ahead of the official meeting of the JMCC – a committee that oversees the compliance rate of the producers from the oil cartel and its allies.
 

S&P Cyclicals

A move higher in only the tech stocks might not be enough for the upcoming breakout in the S&P 500. A move higher in cyclical shares – perhaps inclucing Walmart and Home Depot – who report earnings on Tuesday – might be what’s needed to give the breakout more breadth and endurance.