Is This the Quiet Before the Storm

Market participants will have their ears finely tuned today listening for any new information coming from comments made during the Federal Reserve’s annual symposium held in Jackson Hole, Wyoming. Tomorrow’s activity will be of vital importance as both Janet Yellen as well as Mario Draghi will speak directly to members present at the symposium. It is an unusual occurrence for the heads of the ECB (European Central Bank) and the Federal Reserve’s chairperson to speak from the same podium on the same day.

In anticipation of these speeches, markets remain muted but under pressure. The U.S. dollar has traded quietly, with a fractional gain of +0.16%, currently trading at 9322. U.S. equities and gold have all closed modestly lower on the day.

Gold futures are currently trading at $1291.10, as of 3:10 EDT, for a net loss of $3.60 on the day.

Another potential economic storm is brewing as we get closer to day zero, when the government must either raise the debt ceiling or effectively stop paying its bills, which means shutting down.

With a potential government shutdown looming overhead, market participants have become increasingly concerned about a stalemate over the debt ceiling and the U.S budget.  Politicians continue to have deep divisions when it comes to the United States budget, and the clock continues to tick. Concerns that President Trump is adamant about adding funding for the proposed Mexican border wall to the budget has certainly heightened the already existing anxiety.

Gold Outperforms Stocks YTD

For the first time since 2011, gold is outperforming U.S. equities year to date. With a robust gain of approximately 12%, gold is showing a greater return than U.S. equities. Gold, which began the year trading at $1120 per ounce, is now within striking distance of $1300.

This year’s gains in gold have been largely predicated upon a weakening dollar, which has declined roughly 10% this year vis-à-vis the U.S Dollar Index. Add to that various hotspots creating geopolitical turmoil or chaos, and you have the necessary ingredients for stronger safe haven pricing, which of course, gold is a major recipient of.

Although the outcome of the various events we have spoken about in today’s report is uncertain, one distinct possibility is that the level of volatility and price swings within multiple markets could certainly ramp up considerably.

Wishing you as always, good trading,