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Gold and Oil Have Impressive Upside Days

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Today’s trading is another example of a number of contradictory currents running through markets.

For our purposes, though, the price of gold is of great interest because, as the U.S dollar tumbled, the yellow precious metal profited. It also was helped by a slight change in sentiment in regular trading.

The dollar declined nearly a half a percentage point against the euro and gold rose accordingly. The entire precious metals complex rose in unison on dollar weakness and an almost complete risk-off day.

All three major U.S. indexes were off, the Dow leading everyone down. Disney had its first earnings miss in five years and mega retailers or producers of retail goods were big drags on the markets. Macy’s and Nike were two of the high-profile losers.

Online retail is ceaselessly and seriously denting brick-and-mortar chains, a trend that shows no signs of abating. Some critics are saying that is because venerable retailers do not have the knowhow or the financial stomach for creating an online shopping experience that consumers want. They have also been laggards when it comes to appealing to the Millennial consumer.

Equities and crude oil decoupled again. (It’s a Hollywood marriage between the two markets – on one day, off the next.)

West Texas Intermediate closed at 6-month highs. WTI closed at $46.23, up over 3.00%. It has backed off that level a bit in after-hors trading.

The fundamental factors favoring downward pressure on oil prices that have been in place for two or more years are still strongly present, though. Global production is high and demand growth has stalled. Meanwhile, look for higher gasoline prices over the summer.

It is noteworthy that over the weekend Germany created so much excess of renewable energy that it actually paid consumers to use that energy. The handwriting is on the wall.

Some analysts are saying that higher gasoline prices are cutting into other retail spending. Fine. Perhaps they are. But that doesn’t explain how retail spending grew during the period when crude was 50% higher than it is right now within just the last year.

The yield on the 10-year bond was down amidst the movements in stocks, gold and oil. It did not move in that direction so, so much as to impress us that it will continue strongly downward.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer