Gold Rise Limited By Sharply Higher Dollar

After an astronomically higher count of new housing starts, the U.S. dollar rocketed upward, wreaking havoc on gold, which, nevertheless managed to eke out some gains and rise above technical pricing. 

Regular trading countered the strong greenback and so gold bumped up by almost $4.00. Silver did not see the regular-trading cavalry ride to its rescue and fell by 14 cents.

Equities were mixed to lower in the U.S. as some of the steam seems to be going out of the post-Brexit rally. The Dow, however, saw its sixth straight day of record closes. 

The S&P 500 and NASDAQ were not quite so lucky. Both were down, although not by any significant percentage.

Materials and energy pulled the S&P down, which almost found the green zone regardless.

Oil, in the form of West Texas Intermediate crude, sank again, trading in late afternoon at $44.60 per barrel. It settled earlier at its lowest in nearly two and a half months. The energy market is waiting and worrying what the next stockpile report will bring. 

The troubled Trump campaign saw Donald Trump, in a bit of puzzling populist speechmaking, attack Wall Street. It sounded “under strategized” as they say inside the Beltway. Some analysts are saying that he is showing his liberal tendencies once again. 

Our opposite read is that Mr. Trump feels as if the good old boys and girls on the Street in his native stomping grounds aren’t supporting the Republican standard-bearer as they usually do with big donations. (And, by promoting a return to the Glass-Steagall Act, which has zero Republican support in Congress, he gets to superficially run to the left of Hillary Clinton. A bonus.) 

Europe and Asia also exhibited mixed sentiments. The German DAX and French CAX were down but not disastrously while the FTSE rose fractionally. The Nikkei remained the strongman of Asia, rising about 1.40% on the day while Shanghai and Hong Kong fell.

One of the more interesting reports circulating today is that there is more money in cash than there has been since immediately after 9/11 fifteen years ago. 

We understand this completely. There is no immediate topical need (war, oil disruption, etc.) for safe-haven play-making but rather there is the usual attractiveness of gold and the dollar as longer term assets, and growth assets at that. (Spot gold has gone from $1100 an ounce to $1330+/- over the last 12 months.) 

We find then in the cash holdings the need to remain flexible compelling – i.e., to have cash on hand for a quick dive into an investment – because markets have been somewhat unpredictable. (The post-Brexit rally is a case in point.) So, the cash will allow investors to move toward equities or toward gold or other similar plays, quickly and efficiently. 

Wishing you as always, good trading,