Morning Gold Fix: July 27
Commentary courtesy of www.fmxconnect.com
Gold Option Expiration
Expect absolutely nothing to happen today, with the possible exception of a counter trend move higher due to residual pull from the August 1200 strike. That said, lots of interest in the 1150 put already today.
Where to from here? The stock market is in love with itself now. Many cite the lack of volume as a reason to fade the rally, and we are inclined to agree with them. The Flash Crash has done much to scare away any retail money thinking of sticking its toe back in. But yet the stock market continues to rally.
Banks with unlimited access to ZIRP money and nothing else to do except pump the very equities they are selling to their clients have successfully sold themselves on the strength of this market. It’s a liquidity / credit driven market, not a fundamental one. These type of rallies are unfun.
At some point the Fed’s ability to keep real interest rates at zero will force the weaker hand and smaller balance sheet public to capitulate and go all in on stocks again, just as it forces fund managers to chase returns. Then we will get higher volume rallies. That will be the distribution move. Then I feel stocks and bonds will crap out. When I don’t know. In the mean time. Long bonds, gold stocks, gold bullion, MLPs, LATAM real estate.
The sheeple will be left holding the bag once again. For that time, Gold will be depressed in price as the risk-on crowd has its way.
If we are entering the QE2 pricing zone, then do not expect gold to explode higher. Expect it to keep pace with the dollar’s devaluation / inflation rate. And right now those are muted in the market. If you are a buyer, buy weakness, not strength. We are still in liquidation mode.