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Gold Gets a Second Look as Equities Reel and Inflation Cools

Gold Gets a Second Look as Equities Reel and Inflation Cools

Video commentary for October 11th 2018

Eoin Treacy's view
A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: Wall Street remains weak, China breaks to new lows, Midcaps are underperforming, Treasuries were steady, oil weak, gold breaks on the upside,

J.P. Morgan Early Look at the Market
Thanks to a subscriber for this note which may be of interest. Here is a section:

Eoin Treacy's view
A link to the full note and section from it is posted in the Subscriber's Area.

There is no one factor that investors can point to that offers a clear reason for why the market pulled back so sharply on Wednesday. Instead a confluence of events triggered stops which has resulted in a significant number of US large cap shares closing what were somewhat overbought conditions relative to their respective trend means.

Gold Gets a Second Look as Equities Reel and Inflation Cools
This article by Marvin G. Perez for Bloomberg may be of interest to subscribers.
Gold may have finally snapped out of its inertia.

Prices headed for their biggest gain since March 2017 as of 10:51 a.m. in New York after a slump in global equity markets and data showing slower-than-expected U.S. inflation stoked demand for the metal as a store of value. Futures were set for a third straight gain, the longest rally since Aug. 22.

Bullion, which touched a six-week-high $1,218.60 an ounce on Thursday, has traded near $1,200 since late August as traders weighed geopolitical risks that could boost the metal’s allure as a haven against rising interest rates that dampen its appeal.
The inflation data may spur the Federal Reserve “to pump the brakes on further hikes,” Phil Streible, a senior commodity broker at RJO Futures, said in a telephone interview. The slump in global equities is also luring investors to “safe-haven” assets, he said.

Eoin Treacy's view
Gold has been trading in an inert manner for more than a month following a persistent decline from this year’s peak near $1350. To pause in such a narrow band is not characteristic for such a volatile instrument, and gold finally broke up and out to new recovery highs today.

China Shares Sink Most Since 2016 as 1,000 Stocks Fall by Limit
This article by Kana Nishizawa for Bloomberg may be of interest to subscribers. Here is a section:
Hong Kong didn’t fare much better, with the Hang Seng Index dropping 3.5 percent, the biggest in eight months. Tencent Holdings Ltd., the most valuable stock listed in Asia, slid 6.8 percent to extend a record losing streak to a 10th day.

Chinese shares have been the ground zero for the trade war with the U.S. The Shanghai Composite has lost 24 percent in the past 12 months, one of the worst performers among 94 global gauges tracked by Bloomberg, with the majority of the decline happening this year. A slowing economy and weakening currency is only adding to the gloom.

"Panic? The general mood among fund managers is more like ‘playing dead,’" said He Qi, portfolio manager at Huatai Pinebridge Fund Management.

Telecom and technology shares led declines on the mainland, with ZTE Corp. and 360 Security Technology Inc. tumbling more than 9 percent. Tech shares also dropped the most in Hong Kong, following the sector’s rout in New York.

Volume on the Hang Seng Index and China’s large-cap CSI 300 Index was about 70 percent more than their 30-day intraday average, according to data compiled by Bloomberg. Foreign investors dumped 3.6 billion yuan ($520 million) onshore shares through Hong Kong-China stock links. "It’s been a rough day," said William Wong, head of institutional sales trading at Shenwan Hongyuan Securities HK Ltd. 
Institutional investors have been reducing their portfolio, while we see hedge funds shorting in Hong Kong." A crackdown at Chinese borders on undeclared goods also hurt luxury goods companies, with Prada SpA tumbling 10 percent, the most since September 2017. Jiangxi Ganfeng Lithium Co. dropped as much as 33 percent on its trading debut.

"Negative sentiment is outweighing any positive catalysts, and investors would take any rebound as a chance to sell," said Louis Tse, Hong Kong-based managing director at VC Asset Management Ltd., adding that Shanghai shares may fall further after breaking the key support level. "If we’re talking about seeing an end of the tunnel -- I don’t think so."

Eoin Treacy's view
There is no doubt that increasing tensions between China and the USA have been one of the factors contributing to the underperformance of the Chinese market so far this year. However, the tightening of credit standards, particularly cutting off funding lines for the shadow banking sector and regional banks has also been an important consideration in the underperformance.

Email of the day on immigration and retiring to Dubai
Yes I know some expats who have retired in Dubai but I doubt if any labourer will be allowed to do so.
2) Re Japan's immigration: I thought Germany used to have "guest" workers for it's factories who were there for as long as their work permits lasted and no citizen rights.

And this from another subscriber
I note you state in your comment that it is impossible to retire in Dubai when you stop working. This is no longer the case. The Dubai government has recently introduced new legislation that will allow anyone over 55 to remain in the country provided they qualify under certain monetary thresholds.

Eoin Treacy's view
Thank you both for these insightful comments which certainly helped to boost my knowledge. Germany’s guest worker program was originally designed to rebuild the country after the WWII but the net result was that the workers stayed and the country now has a 3 million strong ethnic Turkish population.

Long-term themes review October 4th 2018

Eoin Treacy's view
FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.
The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

The 49th year of The Chart Seminar

Eoin Treacy's view
The next Chart Seminar will be held on 12 and 13 November 2018 at The Army and Navy Club in London.
If you have an interest in attending an online Chart Seminar please contact Sarah and we will arrange times based on the time zones of those who wish to attend.
I am also in initial discussions with a potential partner about organising a New York Seminar.
If you would like to attend or have a suggestion for another venue please feel to reach out to Sarah at [email protected] 

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.



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