Gold Matches S&P 500 Performance In First 3 Quarters; Up 12% 2017 YTD

Editor Mark O"Byrne

- Gold climbs over 12% in YTD, matching S&P500 performance
- Palladium best performing market, surges 36% 2017 YTD
- Gold outperforms Nikkei 225, Euro Stoxx 50, FTSE and ISEQ
- Geo-political concerns including Trump and North Korea supporting gold
- Safe haven demand should push gold higher in Q4
- Owning physical gold not dependent on third party websites and technology remains essential

Click to enlarge. Source Finviz.com

In the year-to-date the gold price performance has matched the S&P 500, climbing over 12%.

Gold"s matching of the S&P 500 is particularly impressive when you consider the record-breaking performance of the benchmark stock market index in the last year. Yesterday it advanced 0.1% to 2510.06, a new all time record high price.

It is also impressive considering sentiment towards stocks is shall we say "irrationally exuberant", while sentiment towards gold remains muted despite gold eking out gains in 2016 and now again in 2017.

The precious metal has performed well predominantly due to rising uncertainties regarding North Korea, Trump and the political mess in the U.S. and other geopolitical tensions.

Its strong performance is despite noise from the US Federal Reserve regarding its alleged plans to tighten money supply and increase rates. Other major central banks have also provided similar indications.

Elsewhere, gold has outperformed both the Euro Stoxx 50 and Nikkei 225 which are 8.5% and 6.5% higher respectively. The UK"s FTSE and Ireland"s ISEQ are underperforming and have the hallmarks of markets that are topping out.

The FTSE and the ISEQ are 2.5% and 4.25% higher year to date.

Silver, platinum and palladium up 5.5%, 2% and 37%  YTD respectively

Gold wasn"t the only precious metal that performed well in the last three quarters. All four precious metals have climbed in price.

Palladium has been the headline grabbing asset in the last year. In the year-to-date the industrial precious metal is up by nearly 37%. Holdings in exchange-traded funds backed are close to the highest since the beginning of the year.

This week for the first time since 2001, palladium topped the platinum price. Palladium is predominantly used in pollution-control devices for gasoline-powered cars and trucks. In contrast platinum is used in diesel-powered engines.

Governments have been slowly clamping down on diesel due to concerns over its role in pollution and emissions scandals. Platinum is up by only 2% this year. Some believe the metal has been oversold in recent days and there is too much heat in the palladium market.
Meanwhile silver is refusing to go below $16/oz. Some investors may feel disappointed that it has failed to break above $19/oz this year, despite strength in gold.

Investors in silver must continue to take heart that silver does still stand to gain whenever the U.S. dollar loses strength or concerns about the stock market creates demands for assets to hedge risk with.

Geo-political concerns with North Korea and elsewhere fuel demand

In a recent Bank of America Merrill Lynch survey the biggest "tail risk" seen by investors was North Korea"s missile risk.

This was ahead of policy missteps in central banks of the US and China, and credit tightening in China.

However, worries over nuclear war are not the only concern fuelling the price of gold. Uncertainty regarding political haggling and stalemate in Washington are also providing key support.

Critics of President Trump are concerned that he and his team have achieved very little since his inauguration. Any plans that have been proposed are seemingly poorly devised and quickly shot-down.

This week the Republicans failed once again to defeat Obamacare, a key component of Trump"s election promises. Also the White House announced a plan for a lower corporate tax rate and to cut the highest individual income tax rate.

Critics argued however that the plan was awash with cronyism and helped the wealthy. There was also little indication given as to how the tax cuts would be funded amid risks that deepening U.S. deficits may further weaken the dollar.

Expect more safe haven demand next quarter 

As we all know, gold is a barometer for uncertainty. With a 12% climb in the last year and no sign of risks abating, there is little reason to not expect the price to continue to climb.

Should gold reach $1,400, then this will be a four-year high and a sure sign of a bullish breakout for the precious metal.

We shouldn"t invest in gold because of some ambulance-chasing punt on geopolitical disaster. Gold should play a key role in your investment portfolio as a tool for protecting against risk and hedging declines in stock and other markets and currency devaluations.

In truth, there is still a huge amount of uncertainty regarding the outlook for the global economy and global markets.

No one knows how central banks" attempts to unwind the last decade of monetary policy will play out, nor does anyone know how President Trump"s government will survive in an America that will continue to feel more pressure from the likes of Russia and China.

Investors need to stay focused on the medium and especially the long-term and the bigger picture.

Editors Conclusion

Sentiment in the gold market remains quite poor. Most of the public remains on the sidelines  and there is very little positive coverage of gold.

Nor is there an appreciation of the scale of economic, geo-political and monetary risks facing investors and savers today.

There remains a fundamental lack of knowledge of the still very strong supply and demand factors driving the physical gold market and a lack of understanding as to why gold remains a vitally important asset to own in a portfolio.

Many stock markets are at record highs. Many bond markets are at record highs. Many property markets are at record highs. This makes gold which is remains nearly 33% below its record high very attractive from a hedging and diversification perspective.

Real diversification through owning allocated and segregated gold not dependent on third party websites and technology remains essential.

The old Wall Street adage to always keep 10% of your wealth in gold and hope that it does not work remains prudent.

Lets hope for the best but be prepared for less benign financial scenarios...

 

Gold and Silver Bullion - News and Commentary

Gold steady, on track for first monthly loss in three (Reuters.com)

Dollar Pressured After Strong Week; Bonds Advance: Markets Wrap (Bloomberg)

India May Have a Spot Gold Exchange in 12 to 18 Months (Bloomberg)

Gold rebounds from 6-week low as dollar drops (Reuters.com)

U.S. trade deficit shrinks in August, but the gap has widened in 2017 (Marketwatch)

 Source: Zerohedge

Gold and cash reign as U.S. fund investors sell stocks: Lipper (Reuters)

Is This The Real Driver Of Gold"s Recent Weakness? (Zerohedge)

Here’s what this “old school” investor thinks of bitcoin… (Stansberry CH)

You"re Likely A Lot Less Prepared For Crisis Than You Realize (Peak Prosperity)

Rickards Warns "Cracks In The Dollar Are Getting Larger" (Zerohedge)

Gold Prices (LBMA AM)

29 Sep: USD 1,286.95, GBP 963.15 & EUR 1,090.82 per ounce
28 Sep: USD 1,284.30, GBP 961.04 & EUR 1,091.40 per ounce
27 Sep: USD 1,291.30, GBP 963.83 & EUR 1,099.54 per ounce
26 Sep: USD 1,306.90, GBP 969.59 & EUR 1,105.38 per ounce
25 Sep: USD 1,295.50, GBP 957.89 & EUR 1,089.26 per ounce
22 Sep: USD 1,297.00, GBP 956.15 & EUR 1,082.09 per ounce
21 Sep: USD 1,297.35, GBP 960.56 & EUR 1,089.00 per ounce

Silver Prices (LBMA)

29 Sep: USD 16.86, GBP 12.60 & EUR 14.27 per ounce
28 Sep: USD 16.82, GBP 12.53 & EUR 14.28 per ounce
27 Sep: USD 16.89, GBP 12.58 & EUR 14.38 per ounce
26 Sep: USD 17.01, GBP 12.67 & EUR 14.43 per ounce
25 Sep: USD 16.95, GBP 12.57 & EUR 14.27 per ounce
22 Sep: USD 16.97, GBP 12.52 & EUR 14.18 per ounce
21 Sep: USD 16.95, GBP 12.58 & EUR 14.24 per ounce

Recent Market Updates

- Gold Standard Resulted In “Fewer Catastrophes” – FT
- Financial Advice From Man Who Made $1+ Billion in 1929 – Importance Of Being Patient and “Sitting”
- “Gold prices to reach $1,400 before the end of the year” – GoldCore
- Commodities King Gartman Says Gold Soon Reach $1,400 As Drums of War Grow Louder
- Bitcoin “Is A Bubble” but Gold Is Money Says World’s Biggest Hedge Fund Manager
- Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms
- Gold Investment “Compelling” As Fed May “Kill The Business Cycle”
- “This Is Where The Next Financial Crisis Will Come From” – Deutsche Bank
- Global Debt Bubble Understated By $13 Trillion Warn BIS
- Bitcoin Price Falls 40% In 3 Days Underlining Gold’s Safe Haven Credentials
- Gold Up, Markets Fatigued As War Talk Boils Over
- Oil Rich Venezuela Stops Accepting Dollars
- Massive Equifax Hack Shows Cyber Risk to Deposits and Investments Today

US Volatility Spikes To 21-Month Highs (Relative To Europe)

Today"s sudden "Minsky Moment" in markets has pushed US equity risk perceptions to their highest relative to Europe since August 2015, back to old "norms".

As Bloomberg notes, U.S. politics are taking center stage as risks recede in Europe following the French presidential election. With Donald Trump facing the deepest crisis of his presidency, the CBOE Volatility Index surged on Wednesday, while Europe’s VStoxx Index rose less than 5 percent.

Volatility expectations for the S&P 500 Index are near their highest since August 2015 relative to the Euro Stoxx 50 Index.

And it is starting at the short-end of the VIX curve (i.e. this is systemic and not an event-timing risk issue).

And has pushed Equity risk back to its old pre-Trump "norms" against bond risk...

Too Far, Too Fast? Strategists Expect European Stocks To Tumble By Year-End

Equity strategists are cooling on the prospects for further gains in European stocks just as investors poured a record amount of money into the region’s equity funds...

After a French election victory for centrist Emmanuel Macron and analysts suggesting that optimism over better profits is largely priced in, forecasters now see fewer triggers for the rally to continue in 2017.

Equity strategists, “having been torched for their prior optimism in the past, might be cautious in continuing to call Europe up after a very good run,” saidMichael Ingram, a market strategist at BGC Partners in London.

“It’s difficult to identify any near-term catalysts for continued outperformance as most of the political tripwires appear to have been negotiated, easy monetary policy is priced in and the European earnings season is essentially done.”

As Bloomberg reports, the Euro Stoxx 50 Index of the biggest euro-area stocks will finish the year at 3,498, 3.8 percent lower than Friday’s close, according to the average in asurvey of 15 banks compiled by Bloomberg. For the Stoxx 600, nine banks expect the gauge to end the year 2.4 percent lower than Friday’s level, a mean of their predictions shows.

As Le Pen Odds Surge; French Stock Market Risk Hits 5-Year High, Credit Risk Spikes

Marine Le Pen"s French election victory odds reached their highest level of the campaign overnight and it appears global investors are starting to panic-bid protection against the consequences for French stocks...

Oddschecker indicates Le Pen"s incessant rise in popularity...

And as Bloomberg notes, as the French prepare to choose their next president, investors are paying up to hedge against swings in the nation’s shares.

The cost of three-month options on the CAC 40 Index has rallied to a five-year high relative to those on the regional Euro Stoxx 50 Index.

The first round of elections will be on April 23 and the second on May 7... one wonders how much higher this "relative" risk can go before it spills over into something systemic... because French credit risk is now at its highest in 4 years...

"Take Advantage Of Uncertainty While It Lasts" - Trader Warns "No One 'Knows' Anything At The Moment"

There’s a big disconnect for traders. Everyone keeps telling Bloomberg"s Richard Breslow that there"s so much uncertainty out there that it"s too dangerous to trade. They also assume every time we get yet another flailing gyration in a given day’s price action that someone knows something -- and it’s big.

The truth is, no one knows anything at the moment. There are enormous uncertainties on every continent and where the ball stops bouncing is anybody’s guess. And your guess is as good as the next guy’s.

The irony is, while we have been ascribing tremendous insight as the cause of every random walk, there has been the simultaneous dismissal of those who might actually have an idea. Or affect outcomes. It’s a characteristic of our times to more heavily discount what experts are saying, but you can take it too far.

The weird and unintuitive truth is since the beginning of this year the deafening roar of investors’ fear of being wrong has drowned out the fact that nothing is going on. Everyone is psyching themselves out instead of trading.

And it’s a shame because given the enormity of the potential news-set down the road, this might be one of those times where it’s easier to trade the rumor rather than the fact. Especially because so many of those hypothetical facts could be digital events.

Oh my God, oh my God, the pound is collapsing. No, no, it’s having its best day in years. As London staggers in this morning, GBP/USD is about 25 pips from its year-to-date average price. Which we might have seen in today’s trading if the range wasn’t so small.

Trump trades have collapsed? Not yet. The 10-year U.S. Treasury yield is set to debut in Europe today a mere two basis points from its YTD average.

The S&P 500, Euro Stoxx 50 and Topix indices are all within touching distance of their average price. And on and on. Big daily volatility, signifying nothing used to be trading desks’ bread-and-butter.

Janet Yellen hedged herself pretty well yesterday. Bullish on the economy, unwilling to commit to anything. Yesterday’s ECB meeting saw Draghi say as little as possible. Why? Because they are uncertain. Start using this to your advantage.