Gold In Holding Pattern During Quiet Week and Stock Market Highs
Not much to report on precious metals after a quiet week and stock market highs keeping gold from moving up much. Starting the week, gold touched just above the $1,300 mark, but maintained roughly between $1,285 and $1,290 the rest of the week. The Dow Jones Industrial Average hit a historic 23,000 this week, which is keeping many investors still betting on a continuing stock rally. The markets are showing remarkable resiliency for the “Trump trade” rally that kicked into high gear last November. The rally has certainly run longer than many analysts expected, and investors are still complacent about risk.
The dollar index was in flux all week. Treasury yields and the dollar index fell Thursday on poor corporate earnings boosting gold slightly, but was up earlier in the week, which pushed gold down. Tax reform talk this week out of Washington also seemed to be a positive for stocks and weighed on gold.
What this means for investors: Overall, most investors are simply not looking for safe haven assets right now. The trend right now is looking like the markets still have room to run. Some bearish analysts think it is the last call for market bulls, but the correction seems to be further out than expected. However, the bears are seeing correlation between this market and the pre-crash 2007 market as well as the 1987 market before Black Monday (which this week marked the 30 year anniversary of). The VIX was quiet in the lead up then too.
Market Drivers to Watch Going Forward
Although right now the markets seem to be chugging along at a steady, quiet pace, there are plenty of events to look at that could rock them out of complacency (or, alternatively, keep them on course for a while).
As mentioned before, President Trump’s tax reform plan is one of the immediate events to watch. Treasury Secretary Steve Mnuchin said that the markets will tumble if the plan doesn’t pass. That remains to be seen, of course, but political deadlock in Washington could shake the markets. Federal Reserve chair Janet Yellen’s term is up next year, so there is already speculation on who the President will choose as her replacement. There is always the possibility as well of geopolitical events rocking the markets and unforeseen black swans that could tank markets.
What this means for investors: Gold thrives in uncertain and volatile climates, and we are in a lull right now. It might not seem like gold is going to make a massive run tomorrow, but it never hurts to start thinking about long term wealth protection. Like any investment, think about getting in when prices are low.
Stay Connected to the Markets. Subscribe Now to Get the Gold Market Discussion Delivered Every Sunday Directly to Your Inbox!
As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at 602-955-6500 or toll-free at 877-354-4040.