As markets wobbled and oil fell, gold stepped in
Another week, another spin of the headline roulette wheel. The S&P 500 Index still can’t decide where it wants to go, as intra-day volatility is finally back. Tariff chatter between the U.S. and China swung sentiment back and forth, helped by a few confusing soundbites from U.S. Treasury officials. For a few hours, markets rallied on hopes of a tariff truce, then quickly gave back gains once traders realized there was nothing new in the comments.
The weak tone deepened after a Wall Street Journal story suggested that China is betting Trump will blink first in the trade standoff. In other words, markets may need to feel more pain to force a deal.
Amid all the noise, one clear winner emerged: gold. The yellow metal broke through $4,200 per ounce for the first time ever, as investors sought shelter from trade uncertainty. Demand for safe havens has rarely looked this strong.
For Canadian markets, gold and oil remain the twin pillars, and right now, only one of them is holding up. Momentum in gold is extraordinary. The breakout we’ve seen mirrors the one earlier this year, which delivered a 28% rally before pausing. If history rhymes, gold could soon test $4,300, lining up perfectly with the top of its long-term trend.
Even gold’s technical indicators are in nosebleed territory. Gold’s monthly relative strength index (RSI) is above 90 (levels not seen since the 1980 mania), indicating that gold is currently overbought. Still, sentiment is strong enough that major voices in banking circles are now openly saying it makes sense to hold gold. We’re not sure if this is starting to sound like over-the-top enthusiasm (it could well be). We will see.
Oil, on the other hand, is struggling. Prices softened, due to ongoing U.S.-China tensions, worries of oversupply and the fading risk premium from the Middle East. For now, it’s gold that’s carrying the torch for commodities.
Over in Europe, the luxury sector is back. Shares in LVMH (a luxury goods company) jumped the most in years, after the company posted a small but important return to sales growth in Q3. Organic revenue rose 1%, ending a two-quarter decline. The rebound was broad, led by retail and wines, and the contraction in fashion is easing. As we’ve been saying all summer: don’t tell us the consumer is broke.
Back in North America, the big banks kept the good news coming. JPMorgan, Wells Fargo, Citi, Goldman Sachs and Bank of America all beat estimates, helped by stronger investment-banking activity and rising net interest income.
As we look ahead, earnings season is ramping up. That should give markets something real to trade on, instead of fearful headlines.
Listen to our latest podcast for further insights.
