The big news yesterday was that gold made a new all-time high.
We have been wrong on gold lately, and we will address this through a detailed report by the weekend. Most importantly for the average American, the government-sponsored economic recovery could be running into muddy waters. The White House and the Republicans in Congress have ironed out a new stimulus package, as the old will run out in a couple of days (Jul 31). All this will yield to nothing unless the Democrats agree to the Republican proposal in congress. So it will not happen in the current situation just ahead of the elections. It will only end up being like the impeachment of President Trump.
Meanwhile, treasury secretary Mnuchin is applying all the tricks and experience he gained from his previous employer, Goldman Sachs, to come up with alternative ideas. He is looking to get the unemployment benefit extended quickly in some way, without the Democrats holding the economy hostage in negotiating on the mail-in-voting that they very much want. The result could be that the president will use his executive power to extend the unemployment subsidy.
In other news, the world’s biggest hedge fund manager Ray Dalio made some pointed comments on the soundness of the US dollar. He says “we have the trade war, technology war, geopolitical war and now are moving into a capital war.“He argues that when it comes to the dollar the enemy is not half a world away, instead, the US is its “own worst enemy.“ Dalio says“ you can’t continue to run deficits, sell debt or print money, not be productive and sustain all this over time.” He emphasizes that the US has to focus on improving productivity, earning more than they spend, and repairing its balance sheet to maintain a stable USD.
Equities
The markets kept their bid tone throughout the day but were mostly directionless. It rallied to, 3241 in the S&P 500 and filled a gap that existed from Jul 23. As the week progresses and if prices continue to make lower highs, last Thursday’s high at, 3280 could become important. Tomorrow’s Fed meeting and Thursday’s earnings reports could create short-term volatility.
Bonds
There is nothing more to add on bond prices from yesterday’s report.
Euro
The Euro extended its gains and could be getting into a major pattern top at 1.1820 to 1.1880. We will evaluate the bigger picture if we get to those levels. Markets are very long the Euro.
Gold
Gold has broken above its previous highs at 1921.50, and we are forced to reevaluate our structural outlook. The immediate pressure is to the upside as long as 1925 holds.
Author: ©Abraham George, CEO, Founder at AllSeasonsPTL Capital Management Ltd.
