Comm: Precious

(New York)

2017 has been a very odd year in markets in at least one respect—at the same time as risk assets have rallied strongly, so too have gold and other haven assets. BlackRock is arguing that at least for gold, that pattern is set to continue. There are two reasons why. Firstly, gold’s performance is highly linked to real interest rates, which are likely to remain low and are in fact falling right now. Secondly, in the long-term gold’s movements have been more tied to political uncertainty than financial market volatility, a point which really resonates in today’s era of doubt over not only domestic US politics, but also geopolitical tensions.


FINSUM: We like gold’s chances right now. Markets are on edge, the political situation is not improving, and rates looked pinned. All favorable for the yellow metal.

(Houston)

Houston is currently reeling from unprecedented flooding being delivered by the remnants on Hurricane Harvey. The city may receive up to 50 inches of rain, and though totals are currently around 30 inches, it is already flooded to a catastrophic level. Beyond the threat to life and home, the flooding is also having a major effect on the oil industry. Gasoline prices surged because of the flooding as Houston is home to major US oil infrastructure. Gasoline futures jumped almost 7% yesterday because of the damage.


FINSUM: It is unclear exactly how bad this will be for the oil industry in Houston, but things there are currently very bleak, with dramatic flooding and thousands having to be rescued.

(New York)

Market correlations are dropping and uncertainty is rising. Investors are fearful of geopolitical tension and domestic political issues. All of that stress is having a definite effect on one asset class—gold. Gold has been rising on the back of the growing tension and for the first time in six long years (since the bleak year of 2011), gold is rising faster than the S&P 500. Gold is up 12.1% this year, while the S&P 500 is up just over 9%.


FINSUM: So gold and stocks are having a good year, how odd. That cannot be a positive sign for equities, but then again it could just be an aberration.

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