Stocks, crypto, commodities plunge as gold sets aim at record highs
In chaotic Wednesday trading, the gold market stood tall seeing gains of nearly 1% on the day and approached a pivotal $1,900 an ounce level.
Stocks, commodities, and cryptocurrencies all plunged as investors dumped speculative assets, including bitcoin.
The Dow slid 550 points at one point, while bitcoin tanked 30% to $30,000, posting its worst one-day losses since March of last year. The S&P 500 dropped more than 1%, with all 11 sectors trading in the red. Nasdaq was down nearly 1% as stocks like Apple, Facebook, Microsoft, and Alphabet all traded lower.
Many commodities were down as well, including energy, metals, commodities, and lumber.
The only sector standing was gold as prices climbed nearly 1% on the day, with June Comex gold futures last trading at $1,884.10.
Overall, gold is up more than 6% in the last 30 days, rising more than $200 since its end-of-March bottom at $1,680 an ounce.
"Technically, the gold market looks like it is going to break new highs. Anticipation that we are seeing inflation is also part of a bigger picture," RJO Futures senior commodities broker Daniel Pavilonis told Kitco News.
The 1,900 level is on the horizon for gold, and it could open the doors for a move towards $1,970 an ounce. "We broke through the downtrend at $1,861. As long as we stay above that, the next target is $1,970, then we get a good shot at the $2,089," Pavilonis said.
The flows out of the crypto space are helping gold to an extent, but that is just part of the move, he added. "In terms of bitcoin selling off and bouncing off the $30,000, it played some role for gold. Some fund money is coming out of crypto and going into metals."
However, following months of consolidation, the gold space is just ready to go higher, Pavilonis explained. "The order flow on my side, we are seeing that the market wants to go higher, and that entices some of the money that was just sitting on the sidelines to get involved."
On top of that, the U.S. dollar and the U.S. 10-year Treasury yields are no longer capping gold's gains as much. "The 10-year yields moving higher is not capping gold and silver. Also, dollar weakness is a pretty good sign for gold. It has opened the window for gold and silver to move higher without anything holding back," Pavilonis added.
TD Securities also reported new fund money coming into gold and helping the market move higher.
"Supportive institutional flows have helped the yellow metal break out from its downtrend, with signs discretionary capital is once again flowing into gold, most recently highlighted by rising ETF flows alongside rising money manager positioning," strategists at TD Securities said. "With investors sounding the alarm over inflation, institutional interest in the precious metals complex is likely to continue rising following months of outflows.
All eyes will turn to the Federal Reserve this afternoon as the central bank releases its FOMC minutes from the April meeting.
Markets will be looking for any hints of tapering as well as any inflation comments to go along with the Fed's "inflationary is only transitory" stance.
"The road to tapering will most likely begin with the minutes. We suspect Kaplan may have broached the subject of tapering at the April 27-28 FOMC meeting," said BBH Global Currency Strategy's head Win Thin. "The big question is whether any other Fed officials followed Kaplan's lead, who has become the most ardent hawk at the FOMC. If there are any signs of a growing movement within the Fed to taper, this would likely push U.S. yields higher and give the dollar some more support."