On the heels of the price of gold tumbling $20, here is the reason for yesterday’s smash in the metals market.
Market Gets a Lift From Lyft?
Bill Fleckenstein President Of Fleckenstein Capital
March 28 (King World News) –With today being the second-to-last trading session of the quarter, this is often seen as a “fundamentally correct” time to mark up stocks. I find that as good an explanation as any for the strength of the market through midday, as the Nasdaq powered ahead by 0.5%, with the S&P and Dow lagging behind. (Then again, the underwriters of the Lyft IPO may have had a hand in juicing the market as well.)…
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In the afternoon, the early gains mostly evaporated, but a late-day push took the indices back to about a 0.5% gain.
Away from stocks, green paper was a little stronger and fixed income was a little lower. However, there were fireworks in the precious metals, as silver and gold both lost around 1.5%. The proximate cause for that, in my opinion, had to do with the 7% tumble in palladium, which brought its two-day losses to roughly 15%.
Coming Up Short
I suspect that some people may have been unable to sell their palladium, or were unwilling to, and may have hedged by shorting gold. On the other hand (or in addition), perhaps the selloff in palladium precipitated the selling of other precious metals. In any case, it was quite a wipeout.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
“I’m Good With Gold”
Question: Mr. Bill, Would you kindly opine on the effect that unexpected rate cuts this year by the Fed would have on the equity, dollar and bond markets? I’m good with gold.
Answer from Fleck: “We have to wait and see, but likely weaker for the dollar given two years of hype about Fed rate hikes. Bonds and stocks will rally at first, but will it stick? That I don’t know. And we can’t guess. We need to see what happens. Hopefully bonds tank and the Fed loses the printing press. It’s been a loooong wait, but we will know soon enough.”
Gold And The Fed
Question: Bill, are you not surprised with all the chatter about the FED lowering rates later this year or next that GLD is not performing better? They have done a complete 180 since Dec. The market should be waking up that they and we are trapped!
Answer from Fleck: “Yes, I am surprised. Obviously, not many people have changed their mind about the Fed’s tactics and capabilities.”
On The Inflation Front
Question: Hi Bill, On the inflation subject, the story about people living in RVs is doing the rounds again:
Housing costs force LA residents to live in RVs lining streets
None of the commentators make the connection that this is a result of money printing. Furthermore, as more people abandon traditional housing and move into RVs, the ‘owners equivalent rent’ portion of the price inflation calculation will be ‘subdued’ thus there is no inflation. In California there are now 1.7 million people who pay more than 50% of their income on rent. This is so maddening!
Answer from Fleck: “Yes, it is.”
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
***Also just released: European Analyst – Despite Pullback, Picture On Gold Remains Extremely Bullish CLICK HERE TO READ.
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