Last night was nasty but explains why producer stock prices refused to go higher.
I must apologise as the indicator itself had provided warning that gold and stocks were in for a correction.
There was a lower low on the indicator. I was caught in the headlights of the rising gold price.
I would like to see gold fall to A$2,640 as this price sets up gold for a better run in the near future.
Be interesting to see how quickly gold rebounds.
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In the back of my mind I knew there was something going on when I did the extended analysis over the weekend.
Could see the USD sitting on support. Bond yields were rising.
All sorts of attention grabbing headlines were appearing – golden crosses, S&P within 1% of record high, vaccine announcements, etc.
Here are some more headlines.
https://www.marketwatch.com/articles/the-s-p-500-was-this-close-to-a-record-high-then-the-market-collapsed-51597183910?mod=mw_latestnews
https://www.marketwatch.com/story/us-bankruptcies-on-track-for-10-year-high-with-more-than-100-consumer-companies-already-filing-2020-08-11?mod=home-page
https://au.investing.com/economic-calendar/ppi-238
https://www.bloomberg.com/news/articles/2020-08-11/core-u-s-producer-price-gauge-accelerates-from-a-year-ago
The above PPI data showing a 0.6% increase MoM, nearly double what was forecast. Bloomberg report this as good news and a sign of stability.
Of course this is without food and energy in the mix. If this MoM rate continues for a few months, inflation will clearly become a major issue.
The PPI has been this high before. Worth keeping an eye on. On previous occasions it has always pulled back next month (over the last few years).
AND the XJO came within about 10 points of registering a new post-crash market high, set on 9th June. Then fell back.
Golden crosses are yet to form in transport, etc.
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To give you an idea of how hard market makers had to work to do this sort of damage,
https://goldseek.com/article/silver-price-drops-nearly-15-16-billion-ozs-futures-contracts-traded
This is $50 billion in silver. Double the annual global silver market. In one session.
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There are only so many players in the PM markets.
There are only a couple with the capacity to do this sort of damage or throw around these extreme numbers of contracts.
This is a psychological blow more than a financial one.
A$POG is still well above (by A$500) the last quarter average realised price for many gold producers.
The market makers want your stocks.
The other take is – gold is NOT a safe haven. Buy our valueless stocks, CLO’s and ETF’s instead.
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NOTHING has fundamentally changed for investing in gold and gold stock sector..
The sentiment indicator is probably going to show a huge plunge after today.
This is not normal and usually signifies issues in the major markets.
My read – the markets are going into a manic blow-off top phase OR are going to crash and burn.
The bond market suggests the markets are going to surge ahead. We will soon find out.
The last plunge in the indicator began on the 24th February, 2020. We know what happened after that.
Either way, we are in for a roller-coaster ride. I like the way the gold sector is an EWS.
The suddenness/scale of the current fall will have caught most by surprise except for those who engineered it.
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The expected drop in the indicator can be seen. Tomorrow will be interesting.
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