Hawaii Six O - Gary Wagner
Dow Drops 800 Points and Gold Continues to be the Go-To Safe Haven Asset
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Market participants focused on weaker economic data from both the United States as well as globally, which is continuing to create genuine concern about a slowing economy and potential recession. This data coupled with the recent inversion of the U.S. treasury yield curve created a selling frenzy in U.S. equities today.
Traders pushed U.S. equities dramatically lower with the Dow Jones Industrial Average losing 3.05% on the day, a total of 800.49 points is that index settled at 25,479.42. Both the S&P 500 and NASDAQ composite scored equally deep gains. The S& P 500 is currently trading down by 2.81%, which is a drop of almost 83 points, and is currently fixed at 2843.47. The tech heavy NASDAQ composite lost 230.48 points which is a drawdown of 2.88% and is currently fixed at 7787.90. Today’s declines resulted in U.S. equities going to a two-month low.
Although gold and silver are trading well off of their highs, both precious metals continue to act as a safe haven asset. As of 4:10 PM EDT gold futures basis the most active December contract is trading at $1524.20 an ounce which is a net increase of $10.20 on the day, or 0.66%. Gold traded to a high of $1534.90 before softening a little bit on the close. Silver futures basis the most active September contract gained 1.15%, and after factoring in a 0.195 cent gain on the day is currently trading at $17.18.
Along with gold and silver the dollar as well as the yen moved higher in trading today as both currencies are also safe haven plays during a time of tremendous downside pressure in the equities markets both in the United States as well as globally.
Today’s respectable gains in gold happened in conjunction with dollar strength. As of 4:30 PM EDT dollar strength is tepid when compared to market participants desire to purchase gold and bid the precious metal higher on the day. Spot gold is currently trading at $1513.40. According to the KGX (Kitco Gold Index), spot gold has gained + 0.83% on the day as market participants bid prices higher by $15.35. However, after factoring in dollar strength which took gold $2.85 lower on the day, spot gold gained a total of $12.50 in trading today.
The fact of the matter is that the Dow experienced its deepest and worst daily drawdown today, as the market declined by approximately 3% on the day. According to Reuters, “Negative interest rate policy - an unconventional gambit once only considered by economies with chronically low inflation such as Europe and Japan - is becoming a more attractive option for some other central banks to counter unwelcome currency rises.” Recent action by Australia, India, New Zealand and Thailand have aggressively cut rates as they attempt to boost their economies which have been suffering from global economic impact from the trade war between the United States and China.
The concern worldwide for data indicating a global economic slowdown could continue to put pressure on global equities and have create more bullish market sentiment for the safe haven asset class including gold.
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Wishing you as always, good trading,