$XAU, $GLD, $USD
FLASH: The precious Yellow metal is now acting like the Key safe-haven from the world’s problems.
Gold prices spiked Monday rising 1.5% to new 6-year highs. Gold is the play within the trade dispute between Presidents Trump and Xi.
Gold risen 17% since the moment last December when President Trump declared, “I am a Tariff Man.” He was not kidding.
During that frame gold has left a lots of other popular investments in the dust.
Gold has beaten the S&P 500 SPX, -2.98% benchmark stock index by 15%, crushed Apple AAPL, -5.23%, Alphabet GOOG, -3.49%, GOOGL, -3.47% and Netflix NFLX, -3.51%, and Tesla TSLA, -2.57% by 53%.
The Big Q: Why is gold up so much?
The Big A’s: 1) Gold is up because the Chinese currency is down. A lower RMB Yuan makes Chinese exports cheaper in America. Also it makes US exports more expensive in China. 2) Gold is up because participants do not know if the Buck will follow the RMB Yuan South. 3) Gold is up because EU government bond yields, particularly German Bunds, are so low that when you keep your money in cash, you have to pay people to lend them money. 4) Gold is up because nobody knows what’s going to happen to EUR and the GBP if Britain leaves the EU in a no-deal BREXIT. And 5) “Everybody wants a lower currency, that being the case, and there is talk of ‘peak’ gold, it is the place to be.
Note: Last week Larry Kudlow, ruled out intervention in the currency markets to drive down USD, speaking a few days after President Trump said that intervention to drive the USD down was on the table.
These are the other Big Q’s: What is gold worth, how high could it go, is it too late to buy, and of course should it be a long-term portfolio investment?
There are no straight answers to these Questions. It takes 2 POV’s to make a market. They are should the asset be lower (Bears) or much higher (Bulls). And there is no real answer to the Why Q.
This Bull Market in Gold: Gold is in a Bull market, and 1 Key trading signal suggests it has lots of room to run.
Last December in this column I called the brake above its 200-Day MA and has not broken down since.
This technical has been a good indicator that a Bull market is still running for many assets, including stocks. And we know it works for gold, too.
That being the case, then own gold when it trades above its 200-Day MA, Avoid it when it it trades below its 200-Day MA. Now it is trading above that Key indicator.
The data from FactSet say that since the mid-1970’s, when modern gold trading really took off, this strategy would have dramatically increased profits and reduced risks.
The venerable Wall Street adage says, “the trend is your friend” do not ever Question it, and tune out the Noise.