Gold: Has The Rotation Begun?

On the Aug. 19 2021 the Fed minutes revealed that the tapering could possibly begin this year instead of early 2022. The minutes revealed there was a divide between certain state departments that would rather wait for the next jobs report before committing to a date to begin reducing their massive monthly payments.
 
On this news, the already wobbling stock market began to go red. The NASDAQ 100 has looked top heavy for some time, and will lead the way down, much like it has lead the way up. If we are to see a repeat of what happened a few years ago of the “taper tantrum” then we could expect the indexes to head south fairly quickly and over a prolonged period.
 
The last year has seen a quick crash and back to record highs in the NASDAQ 100, S&P 500 and the Dow Jones Industrial Average indexes, and this has been through artificial injection of mass liquidity courtesy of the Fed. Even the merest talk of taper has caused the markets to wobble. Traders have believed every word ushered by the Fed – particularly inflation being transitory. Now the Fed has talked of early taper, the markets all being red look to believe it. The question is - much like interest rate hikes – will it actually happen.
 
At the time of writing, every major index across the globe is in the red. Today will show whether this is a buy the dip reaction, or whether there is follow through. The US dollar is on the up, as is gold. Safe haven trade perhaps, but could this be the start of money rotating out of the major indexes and into the precious metals sectors? It is also worth keeping your eye on the minors and how they react if there is to be a big sell off. Tapering should be a major factor on how Gold reacts. On logic it should go down, however such is the debt crisis, Fed’s balance sheet and normality of “free money” don’t be so sure.
 
Major institutions have already downgraded their forecast for Q3 due to the Delta variant and the expected impact.
 
We have seen every macro in favour of the yellow metal yet it has underperformed in relative terms. What we haven’t seen is Gold’s performance in a slowing economy/stagflation environment. This could be the start of it.