Macro Market Wrap Up, Feb. 19

The big market mover today (February 19, 2019) was gold, which has been on a nice uptrend for several weeks now. Today it was up over $22, briefly touching the $1344 mark for a move of 1.66%. For those of you who don’t watch gold at all, daily moves to the upside are typically considered big moves if greater than $6-$7, or about half a percent. Moves to the downside are big if they surpass $10.

Today’s move up by $22 is a pretty big move. Not only that, but gold hasn’t seen a price over $1340 in about 9 months. So what’s all the fuss that gold is up not just today, but really since it bottomed out at about $1200 last year at the end of September? The move is over 12% in just 4.5 months.

I think there are a few factors at play here that are driving the price of gold. One is that the stock market is not the best place to make money right now on your long positions. I’ve spoken and written about this at length so I won’t discuss that now. Suffice it to say that gold has always been a safe haven asset, and it is behaving as one now too, relative to stocks.

Also polishing the yellow metal is the bond market, and relative to bonds gold looks like a safe haven. The spread on 5-2 treasuries has remained inverted for months now, and the 10-2 is nearing an inversion at only 15 basis points. Bonds are not a safe place right now either, because remember that a flattening and inverting yield curve portends economic danger and possible inflation in the near term. It also makes it harder for banks to lend, and as I always say, access to capital is to the economy just as motor oil is to your car engine.

Another factor is that there has been a lot of merger and acquisition talk in the precious metals industry, particularly among the majors such as Barrick and Newmont. Consolidation in the industry marks a capitulation point, and while that shouldn’t affect the price of the metal itself, it bodes well for shares of the mining companies. And that doesn’t take into account companies like AngloGold Ashanti selling off my assets.

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DM me for more info on better funds and getting a return on your metals. That’s it for now, please leave your comments and questions below. Thanks for reading Volume 55 of The Macro Market Wrap ...

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