Gold and Oil and Equities Go On Wild Rides

It’s hard to believe that the CMOE’s VIX volatility index rose only 1.20% today and fell dramatically yesterday by over 7.00%.

If anything characterizes todays movements in almost all markets, it is inarguably volatility.

Gold soared to $1318 per ounce around 10:40 this morning. At 4:00PM it has plummeted below $1280. Similarly, silver lost quite a hunk of its early gains, off those highs by 50 cents per ounce.

We would like to present something in the field of fundamentals to explain the tumbles, but alas, we think it is based on technical selling that has been initiated and sustained by auto-selling.

The yen, a steady, go-to haven play is up smartly against the U.S. dollar, gaining more than 1.60% as of 4:00PM in New York. There was a bit of strength in the dollar against the euro, but it was so slight it had only a negligible effect on precious metals prices.

The yield on the 10-year U.S. treasury bond stayed steady-to-off, another indication that there is some haven demand for bonds (the face price of which rises in inversely opposite the yield).

Of course, if you’re looking for rock-solid bonds to invest in, the U.S. 10 is your only option. The German and Japanese yields are either right at or below zero, respectively.

It is hard to term today a normal risk-on day in U.S. markets. Oil is in an out-of-control tailspin even if stocks are staying modestly in the green.

At 4PM in New York, West Texas Intermediate is looking to break below $46 per barrel and Brent North Sea below $47 pb.

The Dow is up not quite 0.60%, the S&P 500 about 0.35% and NASDAQ is bringing up the rear with its small rise of a quarter of a percent.

On the seemingly unstoppable power of the yen, feeding on the Bank of Japan’s insistence of staying at 0.0 overnight rates, the Tokyo Nikkei was down more than 3.00%. Hong Kong also tumbled (-2.10%) while Shanghai hung on to just a small loss.

European indexes were down on the Fed meeting news yesterday, the BOJ announcement today and on Brexit fears. However, because of the assassination of Jo Cox, a British member of Parliament, all Brexit campaigning has been stopped for the moment. 

The Washington Post said: “Local media reports suggest Cox's assailant was a 52-year-old man who shouted "Britain First!" -- a slogan identified with the sort of far-right, anti-immigration politics that animates some who want Britain to break away from the E.U., a so-called Brexit.”

Ms. Cox leaves behind a husband and two children aged three and five.

While as investors we tend to see Brexit in financial and economic terms, the murder of Ms. Cox murder shows that extremists everywhere try to deny the normal processes of democratic capitalism. Imperfect as the processes are, the alternatives are frightening.

Wishing you as always, good trading,