Gold Acts Like Traditional Haven; Oil Stays On The Rocks

Gold took advantage of a strong current of uncertainty flowing through markets today that was based on three things. Wrapped around the uncertainty was a weaker dollar.

Right now, foremost is Election Day, one week from tomorrow. Second is a looming, almost-guaranteed interest-rate rise. Third, is the inability of OPEC and other oil producers to reach an agreement limiting output.

Those are “macro” influences and then there are other more temporal events. Choppy data from around the world; Brexit (yes, really); and a nascent movement even among developed nations that is pushing against internationalism and free trade.

Oddly enough, all these negative factors are flying in the face of very strong U.S. GDP growth in the third quarter and a strong earnings report period. (Of course, if GDP was running at a 2.9% growth level, American businesses had to be doing pretty well.)

Thus, gold rose 0.85% while little sister silver rose 2.50%.

The S&P 500 broke below 2100 but seems to have found support at that level after recovering. The S&P wasn’t alone. The DJIA and NASDAQ fell about 1.00%. Europe was also off on the same perceptions but Asia seemed to find positive sentiments, although the Nikkei rose only very modestly.

"There's not a major move on fundamentals, but with investors a little bit skittish, it does make sense to see some selling," said Mike Bailey, director of research at FBB Capital Partners. "I think investors just have itchier trigger fingers right now."

West Texas Intermediate crude fell again, but the slide was limited. Brent North Sea oil fell about 0.70% at settlement.

Although there were haven-seekers in precious metals, the U.S. 10-year bond moved only moderately, the yield remaining right around 1.8%.

The VIX volatility index, which had been down to 13 as recently as October 4th, it has been jetting upward, settling today in the high 19 range. Today alone there was an increase of almost 15% in volatility according to the gauge.

At some point, interest rates will rise. We’re agnostic at the moment, but if we look at this same period last year, the Fed raised rates heading into weakness (in Q1, 2016), coming out of a stagnant Q4, 2015, and a generally weak year in ’15 overall.

Let’s hope we’re not repeating the same problem as we start eyeing 2017.

Wishing you as always, good trading,