Not The Queen's Gold

The showdown on the shutdown ended Friday with President Trump backing off for his demand for funding for a border wall, but just for the next three weeks. US equity markets paused on their upward (+/- .26%) trajectory as US stocks ended the short week basically unchanged.

All key US equities benchmarks confirmed their move to a recuperation phase on positive volume. The short-term patterns for the key indexes are positive while major overhead resistance on the weekly charts is still just a few percentage points above current levels.

Another headwind is global economic growth with both Germany and China showing significant weakness,

What is suspect regarding the sustainability of the current trend is the big move in Gold, +1.45% on Friday, well outpacing the decline in the US Dollar -.86%.

Gold is at levels not seen since May 2018 and currently one of the top performing assets as ranked by our TSI indicator.

This action in Gold seems counter-intuitive to strong equities and therefore, other forces must be at play.

One possible explanation is that Venezuela’s demand for its $1.2 billion of its $8 billion gold reserve currently held by the Bank of England to be returned is being denied. This unusual move has been made at the request of the US.

This could be igniting a demand for gold by anyone who fears running afoul of US interests which now include just about anybody or country.

Recently, the US confiscated Ukraine’s, Libya and Iraq’s gold reserves during periods of political upheaval. This is a consistent recent pattern but it’s not healthy for respecting a nations sovereignty, and a potential inflection point for the markets if markets lose respect for central banks.

This week’s takeaways are the following:

  • All Risk Gauges remain positive and volume patterns remain constructive
  • Gold (GLD) broke out from a compression zone & had an explosive move on Friday
  • Emerging Markets (EEM) continues to lead global equities and poised to take out 200 DMA
  • Speculative sectors such as Biotech (IBB) and Semis (SMH) are leading the bounce
  • Market Internals are working off overbought conditions with sideways action while Sentiment (VXX) continues decline but remains above its 200 DMA
  • The dollar broke down versus many world currencies
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