Housekeeping: Good Morning.
Remember the Toilet paper panic during Covid?
Now imagine that for Gold…
Today:
Commentary: Dollar Correlations are Back
Premium: Gold may be toppy
Premium Markets:
Dollar Correlations are Back
Gold Dollar Correlations are returning, and with them susceptibility to downside volatility. As the banks start to recommend gold to western investors, they are using the coming Fed rate cuts as reason to buy or sell gold. That has reminded them of correlations.
It follows from this, as Fed rate cut opinions rise and fall, so will gold and silver again.
Therefore, if stocks sell off because of earnings, you could see the dollar rise on the back of that. And you could see Gold take it on the chin as westerners use these data points to get out of dollar denominated assets.
Be aware of it. NVIDIA earnings are out today. If they are weak, stocks will broadly drop and Gold will be taken with it. The question is, will the market remember it thinks the Fed is cutting in September or not.
We think Dollar strength that causes Gold weakness is not a reason going into BRICS and the US election to sell gold. But others will.
Why say all this?
Because the short term western mindset is getting triggered to sell if the dollar rallies and buy if the dollar drops.. know this is a side show as the real events for the rest of the year unfold. Try not to get caught up in it
Gold may be Toppy
Technically speaking the market may actually be short term toppy as the longs get a little crowded
Here’s The Market Ear commenting.
The break out move higher refuses igniting properly. The longer term trend is intact, but the fact gold isn't able to trade above the upper short term trend is a sign of fading momentum. Let's see how this plays out, but gold bulls need the shiny metal to trade "well" above the upper trend line
Big inflows into gold...BofA writes: "Gold is now the 2nd largest reserve asset (16.1% vs. 15.6% Euro) and has one of the lowest correlations to stocks across asset classes".
Continues at bottom
Equity Recap:
US equities advanced on Tuesday, and NVDA rallied 1.46% ahead of its earnings report tomorrow. Large caps bested small caps: S&P 500 (+0.16%) vs. Russell 2000 (-0.67%). MSCI Emerging Markets (EEM) and MSCI EAFE (EFA) added 0.14% and 0.46% respectively.
Market News:
"Nvidia’s rivals are mobilising in an effort to break the company’s stranglehold on the AI chip market, raising hundreds of millions of dollars and rolling out new products as they look to share the spoils of a boom in artificial intelligence technology. Cerebras, d-Matrix and Groq are among a group of smaller companies aiming to take a slice of the multibillion-dollar AI chip market from Nvidia, which has so far dominated the first wave of investment with its graphics processing units, or GPUs." Source: FT
"September is a popular time for companies to go public. This month’s stock-market volatility is putting some plans on ice.WSJ
"Nordstrom offered a rosier view for the current year’s sales following better-than-expected results at its discount chain, Bloomberg
"Eli Lilly has released a new vial version of its blockbuster weight-loss drug Zepbound for about half the price of its original injectable pen FT
"Chinese electric car company Xpeng on Tuesday announced that its mass-market brand Mona will start selling some models for less than $17,000.: CNBC
Politics/Geopolitics: Israeli Headlines
Israeli, US, Egyptian and Qatari negotiators were meeting in Doha on Wednesday for "technical/working level" Gaza ceasefire talks, via Reuters citing sources.
The Israeli army launched a large-scale operation against militants in various parts of the northern West Bank, according to Al Jazeera citing Israel Channel 14.
"Hundreds of Israeli soldiers take part in the operation in the northern West Bank with full air cover", according to Sky News Arabia.
Israeli operation in the West Bank is expected to last for days, according to Israel Channel 14. Sky News Arabia suggested "Israeli operation in Tulkarm and Jenin [in West Bank] is expected to last for a long time, up to weeks", according to Sky News Arabia.
"Israel's Channel 14: The army mobilized thousands of soldiers from special units in preparation for the large-scale operation in the northern West Bank", according to Al Jazeera.
"Israeli army storms Aida camp in the southern West Bank", according to Al Arabiya.
An Israeli delegation from the Mossad, the IDF and the Shin Bet will travel to Doha on Wednesday to continue talks with US, Qatari and Egyptian officials to close the remaining gaps in the Gaza hostage and ceasefire deal, via Axios' Ravid.
Several oil tanks reportedly on fire at Glubokinskaya oil depot after Ukraine's drone attack in Russia's Rostov region, according to Reuters citing Telegram reports.
Some headlines via NewSquawk or DataTrek
Data on Deck: PCE, Housing, and Gaggle of Fed Speakers
MONDAY, Aug. 26Durable-goods orders Daly interviewTUESDAY, Aug. 27S&P Case-Shiller home price index
WEDNESDAY, Aug. 28 6:00 pm Atlanta Fed President Raphael Bostic speech
THURSDAY, Aug. 29 Trade, inventories, home sales 3:30 pm Atlanta Fed President Raphael Bostic speech
FRIDAY, Aug. 30 PCE1
Final Market Check…
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