‘Funny’ Markets v Gold

Last night typified the unprecedented financial market environment we find ourselves in.  Courtesy of ZeroHedge the following charts tell a worrying story.  Firstly the US market fell (and gold rose) on the news of the Empire Fed Manufacturing Survey plummeting to -14.92 (from 3.86 and versus expectations of 4.5).  This is the lowest it’s been since the GFC and the biggest miss (surprise) since 2010.  Critically too, the new orders component was at its second lowest since the GFC – important given consumption accounts for 70% of US GDP.

But wait!  Soon after the NAHB homebuilder figures were released, showing sentiment rose to 61 from 60.  Hardly amazing and completely in line with expectations.  So lets look at what the market did immediately after…

That surge would be based on lots of people buying the dip on the positive news yeah?  Nope – the chart below exemplifies the ‘unreal’ nature of today’s markets.  That red is relative volume.  Lots of red means little volume.  The market rallied like that on a complete lack of volume of trades.  Curious huh…  ZeroHedge aptly describe it as LOLume (LOL = ‘laugh out loud’ for our older readers).  It would be funny if it weren’t so scary.

In an environment such as this, one should always listen to one’s ‘gut’.  How long can markets based on ‘make believe’ last?  Gold’s value is intrinsic… it is in and of itself courtesy of its rarity and lack of counterparty risk, and has been for thousands of years.  Current critics say its days are gone.  We have no doubt your ‘gut’/reality and history will prove otherwise.

Regular listeners to our Friday Weekly Wrap know of the continual data that paints a very different picture to the awesome US recovery rhetoric we hear that will supposedly pull the world out of the coming recession. This ZeroHedge story HERE also gives a real insight into that ‘on the ground’ so to speak.