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Market Boasts Strength While The U.S. Dollar Drops And Gold Rises

ByMichele Schneider
Published 08/29/2021, 03:27 AM
Updated 07/09/2023, 06:31 AM

IWM-GLD Daily Charts

Friday, the Fed’s Jackson Hole symposium stimulated the market with all 4 major indices closing positive. Due to the improvement in the economy, the Fed feels more comfortable with tapering monetary policy possibly near the end of 2021. This means the Fed would begin to reduce the $120-Billion monthly bond-buying program.

Additionally, the Fed will continue to keep interest rates low as it looks for further growth in the jobs market.

In terms of the COVID-19 Delta variant, the Fed believes that while it could hinder short-term growth, the long-term recovery is still intact.

With that said, one controversial matter the Fed has stuck to its guns on is that inflation is only transitory. Transitory inflation could stem from their view that supply-chain disruptions are under pressure from a surge in demand and will naturally adjust with time. It could also be that the Fed does not account for Food and Energy when looking at inflation numbers.

However, inflation can become very complex when the U.S relies on a vast number of imports while we continue to see shortages stalling not only in the auto and tech industry, but also the retail space while stores struggle to keep inventory.

On top of that, the current administration continues to push multi-trillion-dollar bills and budget resolutions.

While more spending comes with positive intentions of helping social safety policy and furthering an economic recovery, many are worried about where the money will come from, and its effect on inflation and the dollar.

On Friday, both gold and the dollar made decent moves with Invesco DB US Dollar Index Bullish Fund (NYSE:UUP) selling off, while SPDR Gold Shares (NYSE:GLD) rose 1.4% clearing over its 200-DMA at 169.68.

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On the other hand, the market is taking a higher note with the major indices including the S&P 500 (SPY), NASDAQ 100 Invesco QQQ Trust (NASDAQ:QQQ) clearing all-time highs.

Additionally, the small-cap Russell 2000 index via iShares Russell 2000 ETF (NYSE:IWM) finally cleared a major resistance level of $225. With a strong close at $226.37, IWM now can run towards highs at $234.

Therefore, while the short-term market looks strong, enjoy the run. Nonetheless, we should keep inflation in mind as it has yet to be dealt with or even fully acknowledged.

ETF Summary

  • S&P 500 (SPY) New highs.
  • Russell 2000 (IWM) Needs to hold over 225 as new support.
  • Dow (DIA) 356.60 high to clear.
  • NASDAQ (QQQ) New highs.
  • KRE (Regional Banks) 67.22 recent high to clear.
  • SMH (Semiconductors) 271.79 cleared. Watching to hold over 272.
  • IYT (Transportation) Needs a second close over the 50-DMA at 255.76 to confirm a phase change.
  • IBB (Biotechnology) Doji Day. 164.27 support.
  • XRT (Retail) Needs to get over 97 and hold.
  • Junk Bonds (JNK) 110.10 high to clear.
  • IYR (Real Estate) Rangebound between 108 and 105.24.
  • XLP (Consumer Staples) 71.70 support area.
  • GLD (Gold Trust) Like this to hold the 200-DMA at 170.16.
  • SLV (Silver) 21.62 new support level.
  • XME (S&P Metals and Mining) 43.13 support the 50-DMA.
  • USO (US Oil Fund) 48.56 next resistance from the 50-DMA.
  • TLT (iShares 20+ Year Treasuries) 147.60 support the 50-DMA.
  • USD (Dollar) 92.54 support the 50-DMA.
  • DBA (Agriculture) 19.36 resistance. 18.55 support.
  • VBK (Small Cap Growth ETF) 292.73 resistance.

Latest comments

"NYSE:GLD" Michele Schneider, I've seen you write about this particular gold fund from time to time. I've spent quite a bit of time doing my due diligence into GLD. Would you happen to know why there is a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? The GLD managing organizations sure went out of their way to create this glaring audit loophole. What is the purpose of this loophole? Additionally, the GLD organizations promise that this fund is 100% backed by actual physical gold but yet they staunchly deny retail investors the right to any of their listed physical gold. I remember there was a highly publicized visit by CNBC's Bob Pisani to GLD's gold vault. This visit was organized by GLD's management to prove the existence of GLD's gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on any relevant bar lists. It was later discovered that this "GLD" bar was actually owned by ETF Securities.
Note that even on the subject of GLD's insurance, they are not straightforward about it. Their representatives will not confirm nor deny the existence of GLD's insurance. I recommend anyone curious about this to confirm via calling GLD's publicly listed number for general inquiries at 866 320 4053 and ask about this clause from the GLD prospectus: "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." Exactly how much of the fund is insured? They will not give you a straight answer and might even throw in some bizarre excuse which I've experienced. Why hide this information from investors?
Why a clause? ETFs cannot sub custodians, that is why. ETF Securities, the firm that bought the Pisani bar cannot audit it’s sub custodian either. HSBC and GLD would never allow ETF Security auditors to visit or audit, simply because they bought bars from GLD inventory. No one can audit sub custodians. You either trust London Metal Bullion Association or you don’t trust them. The trust worthiness of the LMBA is why gold ETFs associate with this system. How trustworthy is a retail gold dealer that maybe bought from a customers instead of a refinery? LBMA can only buy from fellow dealers or approved refineries. World Gold Council is exclusively a bunch of gold mining companies and the sponsor of this ETF. The suggestion that this fund is a fake, or that the London Good Delivery gold system is unreliable is not backed up by data. . Professional and individual investors love ETFs because they work. That goes for physical etfs too like GLD.
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