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Market Volatility May Be Indicating Imminent Problems

Commentaries & Views

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(Kitco News) - With the equity markets in somewhat of a chaotic state and the dollar index on a weaker path, one would have expected the metals to catch a bid. It is possible that the weakness in the equity space is being perceived as a temporary blip, which has been the pattern over the past year. Each time that the equity markets looked like they would roll over values snapped backed and new highs were posted. It is conceivable that funds and investors have sold metals to meet margin calls, especially in the tech sector. Added to this is the growing voice of the world's central banks that the easy money that has greased the equity skids may be coming to an end. If this equity weakness turns out to be more than a temporary setback these same central bankers will stampede to add more liquidity and push yields lower. The markets are at a critical juncture. Can they sustain upward bias with central banks tightening?  Data suggests they can in the short term but are likely to run into issues if yields rise too quickly. Complacency remains entrenched. This can change quickly. One scare, which could be North Korea, Syria or an acceleration of equity weakness, could start the rout. Core positions in metals should be maintained. Insurance is now no longer optional.

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