Gold continued its unending run despite easing trade tensions and the prospect of the government reopening. Both developments should have dampened the demand for gold. Why the continued advance?
Some have pointed out FOMO, referring to the fear of missing out sentiment. Others suggest the massive proliferation of gold ETFs creating an unsatiable demand for the metal, similar to the demand for cyber currencies. And then others suggest more fundamental reasons such as massive Chinese buying to the reckless spending of the western democracies where a sovereign debt crisis is all but ensured if action is not taken soon.
It is generally accepted markets were surprised by the S & P down grade of French debt to A+, the result of fiscal impasses and the inability to enact any policies to curtail out of control and unsustainable spending.
Equities led by the mega caps advanced yesterday on the belief that AI spending may begin to show fruit. Trillions have been spent and to date, revenue increases have not yet occurred. Is this beginning to change, a change that should be referenced in upcoming earnings calls?
Considerable attention was focused on a Bloomberg headline stating that 85% of companies that post results exceeded expectations. About 7% of the S & P have reported—mostly financials—and it is dangerous to extrapolate this information. Moreover, it is generally accepted that expected results have been dumbed down [again].
Writing the obvious, the big worry is that stock prices—especially in the AI and mega sized tech companies—are already reflecting an exceedingly optimistic outlook.
Last night the foreign markets were up. London was up 0.33%, Paris up 0.53% and Frankfurt up 0.25%. China was up 1.36%, Japan was up 0.27% and Hang Seng up 0.65%.
Futures are flat. Gold slipped after an incredible advance. The 10-year is off 1/32 to yield 3.99%.
