Gold and stocks part ways

Boing.

That’s the sound of the stocks bouncing. Enjoy it while it lasts. It was a brutal week. Today is a bit of a relief rally. Let’s use that pause to point out the two most important things that happened this week: gold broke out of jail and oil made a 124-low relative to gold.

Don’t take my word for it. I’ll turn it over to Charlie Morris from The Fleet Street Letter. Charlie’s gold signals blared early Monday morning. A note went out to his subscribers hours later with a “buy” recommendation. He elaborated on the story in a note he sent me late last night:

There has been a change in the trend [for gold] for the first time since 2012 whereby it has become the world’s strongest currency. On previous rallies, it would be strong on euros yet weak in dollars or strong in yen, but weak in sterling. For the first time, it ranks above everything.

The gold regime model has swung around to bullish from bearish at breakneck speed. The gold bear market, having started in 2011, was the second longest on record. The longest was 1987 to 1993. These things can take time.

It looks as if the 2011 peak was too much, too soon as opposed to being plain wrong. It’s onwards and upwards but there are obstacles. For example, Q2, just a few weeks away, is seasonally bearish. That said, if macro conditions continue to dominate, it’ll cut through that rule like a hot knife through soft butter. 

It’s the kind of move you see when there aren’t a lot of bears left. For gold, that time may be now. Of course no market moves up in a straight line. Also, a rising gold price is a rebuke to central bankers and their incessant talk of inflation targeting and negative rates. To that extent, it may spur them into even further flights of monetary madness.

Category: Market updates

From time to time we may tell you about regulated products issued by Southbank Investment Research Limited. With these products your capital is at risk. You can lose some or all of your investment, so never risk more than you can afford to lose. Seek independent advice if you are unsure of the suitability of any investment. Southbank Investment Research Limited is authorised and regulated by the Financial Conduct Authority. FCA No 706697. https://register.fca.org.uk/.

© 2021 Southbank Investment Research Ltd. Registered in England and Wales No 9539630. VAT No GB629 7287 94.
Registered Office: 2nd Floor, Crowne House, 56-58 Southwark Street, London, SE1 1UN.

Terms and conditions | Privacy Policy | Cookie Policy | FAQ | Contact Us | Top ↑