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Gold And Stocks Soar As Risk Recouples

Tyler Durden's picture




 

An expectedly low volume day saw equity futures wiggle around VWAP until the day-session open at which time Energy and Materials sectors surged to lift stocks 10 pts higher into the European close. Commodities all surged - led by Oil with its 'Hormuz'-premium pricing in - and while the USD weakened after the European close ( driven by EURUSD bouncing off the 50% retracement of the EU Summit spike), equities also lost ground and rapidly reverted back down to VWAP. The strength in gold and silver was interesting as they extend their gains from pre-Summit lows (gold up over $70) and most notable to us was the recoupling of risk assets broadly with equities. Gold and stocks are seemingly back in sync and so are (separately) the USD and 10Y Treasury yields. After stocks hit VWAP they rapidly resurged back up to the highs of the day and closed there dragged up by a push into the green by HYG (with both stocks and high-yield seeing some sizable blocks going through at the highs). VIX closed down very modestly at 16.6% but most notably was the rise in implied correlation (and implicitly index vol - VIX - from around 1045ET into the close, even as stocks rallied). It would seem that the rise in WTI back over $87.50 (and Brent over EUR80) has been the 'risk-driver' for much of this rally (with CONTEXT - broad risk proxy - playing squeeze catch up to equity's health). In summary, equities are up over 5% as oil is smashing higher due to pending Hormuz strait closing and WAR; Germany and Finland basically saying NEIN to EU Summit deal as it stands; JPM in an energy market probe and BARC told to lower rates by the government!! All is well in nominal, central-bank, asset-value land.

Whether it is QE beig priced in again or simply a reversion to whatever value assets can find is unclear but the convergence between Gold and Stocks as well as Treasury yields and the USD is coincidental...

 

Commodities surged with Oil on its own but PMs notably levitating...

and VIX decoupled from equity's ebulience...

 

The squeeze in equity markets finally drove a squeeze in other assets as is very evident from the chart below of CONTEXT (our broad risk-asset proxy) which reverted higher overnight (thanks to Oil and Treasuries more than FX/spreads) to converge with stocks around the US day-session open...

It would seem that given this squeeze in risk-assets and the rise in VIX and implied correlation - along with gold/stocks and USD/TSYs recoupling that there is little ammo left for a further squeeze higher and from here it is real macro data or CB headlines that make-or-break reality (as usual).

Have a great 4th.

Charts: Bloomberg and Capital Context

 

Bonus Chart: The hope-driven rally and re-convergence of the S&P 500 priced in gold relative to Treasuries - are we set for Gold to outperform ES in the nest few days?


 

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Tue, 07/03/2012 - 13:40 | 2584525 ciscokid
ciscokid's picture

Get some gold while you can.

Tue, 07/03/2012 - 13:44 | 2584538 CPL
CPL's picture

Done.  Get some seeds, land and food stores while you can.

 

Think record breaking heat for the world's bread basket helps food current world supply issues?

 

Go long MRE's.

Tue, 07/03/2012 - 13:49 | 2584570 fuu
fuu's picture

"Go long MRE's."

and Ex-lax.

Tue, 07/03/2012 - 14:13 | 2584675 Yen Cross
Yen Cross's picture

Good one "fuu'.

Tue, 07/03/2012 - 14:01 | 2584586 francis_sawyer
francis_sawyer's picture

Seeds are fine, but are all but useless in an idiots hands...

Learn irrigation & water conservation techniques, soil temps, fertilization, pest control, drought tolerance, food storage, molds, fungus...

Jerkwads that think they're going to survive by going to Wal Mart at 11:59:59 and buying a couple of packets of seeds are delusional...

Half the DC METRO area has been without power, (& many without H20), since last Friday night (which is probably why the ZH page hits have been down)... Anyway ~ welcome to the REAL WORLD people... Not that I don't empathise with their plight, but when the storm was hitting the francis_sawyer farm (which was the damndest light show I've ever seen in my life), I was thinking "Wonderful ~ this is just the perfect thing for the watermelon that I'd just put into the ground"... Turns out it was, & I had the backup generators going by the same evening when the power flicked off... But shit, I ain't bragging here... I'm just realizing how truly fucked & unprepared most people are...

Tue, 07/03/2012 - 14:02 | 2584626 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1 ton

And that is why Mr. and Mrs. Bearing are toast if we have a REAL TEOTWAWKI.  We are too old to become farmers.

If we are all lucky and just get Great Depression v. 2, then count your blessings.

Tue, 07/03/2012 - 14:06 | 2584641 francis_sawyer
francis_sawyer's picture

just start getting friendly with some "utes" (sorry slewie ~ I borrowed your word ~ I'll gladly pay my royalties in watermelon, cantaloupes, zucchini, tomatoes, carrots, or potatoes)... & if you don't like potatoes, gimme awhile & I can turn them into something that has a little more 'zing' to the lips...

Tue, 07/03/2012 - 13:58 | 2584606 Hmm...
Hmm...'s picture

Am I still the only person interested in the fact that Gold goes the same direction of equities?  Risk on:  Gold and equities up.  Risk off: Gold and equities down. 

It's not a 1:1 ratio... but gold continues to track equities very closely since late summer last year.

Sure, at some point it might decouple from equities... but for now seems like the same players in equities are the same players in gold.

makes you wonder what will happen when the crash comes.  My working hypothesis has been that gold would decouple from equities in a flight to safety...  but that hasn't really worked out so far yet.  Do we need to wait until the fiat currencies literally explode for that to happen?

could future significant inflation already be priced in?  (i.e. that got us from Gold $600 to gold $1600).  if so the only thing that will blow gold out is hyperinflation (or sky high inflation) and/or future currency collapse.

Tue, 07/03/2012 - 14:20 | 2584703 eclectic syncretist
eclectic syncretist's picture

The great thing about PM is that they will protect your wealth over the long-term, because they are (for the most part) beyond the manipulative practices that pervade most markets.  If you are acquiring them to get rich you probably won't be entirely pleased, but if you are acquiring them to be sure that your purchasing power is not debased as per the Central banks business model you will be quite pleased.  They will keep you safe from the ravages of the skimsters.

http://finance.yahoo.com/echarts?s=GLD+Interactive#symbol=gld;range=my;c...^dji;indicator=;charttype=ohlc;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

Any given day is crap.  It's the long-term trend that's important, and gold and silver looked primed for another big leg up in value soon for those who are patient enough to just wait.

Tue, 07/03/2012 - 14:20 | 2584707 Abraxas
Abraxas's picture

How can you price in future inflation? It goes up and up and up until there's some restraint in printing and/or return of confidence.

We don't need hyper-inflation for gold to break upwards. We need more people and institutions to realize that paper (electronic digits) has no intrinsic value and the powers that can print it are no longer to be trusted. 

Then, not only gold, but equities, oil, wheat, will go up. Heck, even the housing will go up.

Tue, 07/03/2012 - 14:22 | 2584726 CPL
CPL's picture

It's an indicator of TPTB printing money behind everyone's backs and creating the hyperinflation scenario we are all getting hosed by.

 

Only way to protect the value of anyone's savings when the system resets is keep it in silver and gold. Don't think in terms of the end of the, think Peruvian Sol readjustment...or a reverse split in equity terms.  When the penny is discarded and a new paper bill is introduced it is a good sign that hyperinflation is in full swing.

 

Canada for instance.  Losing the penny and redeveloped the $100 bill against counterfeiting.  Can't afford to make a penny is a bad place to be.

 

Don't worry otherwise, we'll all see DOW 36000, that's the plan as far as anyone can tell.  It can't be anything else with the defined courses of action.

 

Long holding PM's and PM making companies.  Plus to hedge the situation, don't keep most of it in the bank.  Think shovel, hole, map and a trader's most useful strategy.  Wait.

Tue, 07/03/2012 - 14:22 | 2584730 francis_sawyer
francis_sawyer's picture

IMHO ~ One of the better ratios of all time is between SILVER:CRUDE (not really CRUDE, per se, but $GASO) 

So think of it this way... In 1964, a gallon of gas cost 30 cents (3 Mercury dimes)... 3 Mercury dimes, in this moment, would get you ($2.04 x 3 = $6.18), which has already accounted for the .90 silver content...

So basically it's how you want to think about it... Is silver too high? Or is gasoline too cheap... My bets are on the latter (being as gasoline, in other WESTERN economies [which, nudge, nudge, don't have military force projection capabilities])...

None of that really means anything, given the unpredictability of events, but it does, perhaps, suggest certain things... Namely? The PRICE OF OIL (in America), is a much more strategic fortress to defend than the price of silver... As an example ~ If gasoline would go straight to $6 a gallon in this country, we'd be toast... As things get dicier, more manipulation needs to occur towards that complex, rather than towards PM's...

I welcome counter arguments...

Tue, 07/03/2012 - 14:20 | 2584682 SRSrocco
SRSrocco's picture
U.S Gold Net Exports Increased Substantially During First Quarter 2012

It is quite interesting just how much gold is leaving the United States compared to last year.  You can read about it in my article posted at the link above:

Tue, 07/03/2012 - 13:44 | 2584541 caimen garou
caimen garou's picture

PM's levitating, I likes it,I likes it alot!

Tue, 07/03/2012 - 14:15 | 2584695 LiquidityandLunacy
LiquidityandLunacy's picture

I junked you because you are an idiot. Why would you want PM's to levitate? Do you not like buying them on sale?

Tue, 07/03/2012 - 13:46 | 2584548 dannyboy
dannyboy's picture

You too Tyler's! You work so hard for us you guys need a break aswell.

Tue, 07/03/2012 - 13:47 | 2584558 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Get some fresh air while you can. Why is anyone still sitting in front of a screen? Most importantly, including me. I'm outta here.

Tue, 07/03/2012 - 13:48 | 2584565 zorba THE GREEK
zorba THE GREEK's picture

Gold, Gold, buy it while it's cold.

Once it gets hot, you will pay alot.

Tue, 07/03/2012 - 14:05 | 2584638 DoChenRollingBearing
DoChenRollingBearing's picture

+ 2

One for poetry, one for thinking ahead.

Tue, 07/03/2012 - 13:49 | 2584569 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Deflation is coming!  DEFLATION IS COMING!  RUN!  RUN AWAAY!!!!

KING DOLLAR!  KING DOLLAAAARRR!!!!!!!!!!!!!!!!!

Tue, 07/03/2012 - 13:54 | 2584592 gjp
gjp's picture

off topic, but where has Doug Noland gone?  Hasn't written for three weeks, after almost non-stop weekly missives for more than a decade.  Has he thrown his hands up and decided there is nothing more to say, let the RoboTraders of the world call the tune?

Tue, 07/03/2012 - 13:54 | 2584593 Silversem
Silversem's picture

Get gold! But don't forget to get a Contract for difference on gold also! That way you get some nice leverage on the rising goldprice.

Tue, 07/03/2012 - 14:02 | 2584595 Abraxas
Abraxas's picture

Jim Sinclair thinks gold is due for a 50% bull run. I personally will be happy with 20%.

edit: I hope Jim is right. It would be nice to smear it all over Nadler's face.

Explain why gold went up, Jon!

Tue, 07/03/2012 - 14:12 | 2584671 akak
akak's picture

 

Explain why gold went up, Jon!

I'm sure snake Nadler will rationalize it as having something to do with the "doommongering" of his self-styled "Radical Goldbug Extremists".

What the fuck such a pro-bankster shill is doing masquerading as the official spokesman of a precious metals dealer is a question that should be put to both snake Nadler and his boss, Brad Kitner, at every public appearance which either one of them makes.

Tue, 07/03/2012 - 14:16 | 2584700 LiquidityandLunacy
LiquidityandLunacy's picture

Another idiot junked. Why would you be happy with the price of your future going up? Realization is coming, you my friend will be lighter because if it.

Tue, 07/03/2012 - 14:33 | 2584764 Abraxas
Abraxas's picture

Do you always use words like “idiot” to get your point across? Are you used to talking to people in this manner every time you disagree with them? It seems to me that you have issues that no amount of gold can compensate for.

Tue, 07/03/2012 - 14:11 | 2584667 GrinandBearit
GrinandBearit's picture

But the volume isn't that great.

Was it real buying?, or did it simply follow the market up?, or is it because the paper manipulators away on vacation?

Tue, 07/03/2012 - 14:23 | 2584733 Bicycle Repairman
Bicycle Repairman's picture

War nerves = gold, oil up.  Unless there is a war this is transitory.

Tue, 07/03/2012 - 17:05 | 2585242 augustusgloop
augustusgloop's picture

junior algo-analysts are up to the hamptons (summer shares) , so the machines aren't driving paper gold down. machines aren't working on mining shares either, so they too are working upward. we'll see what happens when the weevils come back to stare at their screens. 

Tue, 07/03/2012 - 14:46 | 2584813 Grand Supercycle
Grand Supercycle's picture

Rally Warning Confirmed...

As mentioned earlier, further equity strength and USDX weakness expected this year according to my analysis.

http://www.zerohedge.com/news/2012-12-24/market-analysis

Tue, 07/03/2012 - 15:51 | 2585006 Boilermaker
Boilermaker's picture

IYR now at 52 week highs.

Of course.

Tue, 07/03/2012 - 16:09 | 2585059 Meesohaawnee
Meesohaawnee's picture

Ok. i almost gagged. On the front page of the internet site marketed for 2 year olds known as yhoo, they have a slogan and add for their Finance site. Slogan is "If every day was a bull, you wouldnt need us"   Should we play insert alternate headline. ??  "Because you have Ben buying you dont"?  "Shorting?. thats for suckers that think its a market"

Wed, 07/04/2012 - 01:52 | 2586103 ak_khanna
ak_khanna's picture

The simple logic behind which all markets move is that till there are shorts in the system, the markets will rise forcing them to cover and till there are longs in the system, the markets will keep on falling forcing them to liquidate. This is how we determine prices for everything in todays world be it food, oil, shares, currencies etc.

The top rich 1% and the too big to fail financial institutions who have the power to move markets are the key operators of all the casinos. They also have the politicians and regulating bodies on their roles so there is no stopping them till the whole system blows apart.

http://www.marketoracle.co.uk/Article35345.html

Do NOT follow this link or you will be banned from the site!