Marc Chandler – Recapping A Turbulent Week In The Markets, Capital Fleeing The US, Gold To All-Time Highs
Marc Chandler, Managing Partner at Bannockburn Global Forex and Editor of the Marc to Market website, joins us to unpack another turbulent week in the markets, key moves in the currencies, global trade tensions between the US and China, and gold continuing to break out to new all-time highs as the global safe haven.
US equities started off the week plunging further with volatility is surging, and traditional safe havens like the US dollar and bonds were being sold down as capital flees US assets. We discuss the margin calls of the last two weeks being a factor as to why gold was initially sold last week as a source of funds, and how many net-long speculators may have gotten wrong-footed and needed to sell both equities and bonds.
In a related currency trade, as many positions got unwound, and converted back into the currencies borrowed as carry trades -- the Japanese Yen and Swiss Franc, that money coming into them gave them appearance of being safe haven currencies. Marc outlines that it really was more a market narrative being applied to those trades being unwound.
He goes on further to address other market narratives like those blaming China for crashing the bond markets and selling treasuries in retaliation to the trade tariffs, but without any factual evidence of this being the case. Marc responded that, “Maybe it is true, but where is the evidence?” He points out that if China was selling down their US treasuries in a big way, that it would be self-defeating, because they are going to get lower yields everywhere else. Instead, China has been focusing more on retaliating with reciprocal tariffs and export restrictions on key commodities like rare earths, antimony, and tungsten.
We then transitioned over to gold’s move to all-time highs in all global fiat currencies, and if it was getting too overbought. Marc’s take was that if we were in normal times, then sure it is getting overbought, and is well above the Bollinger bands; however, these are not normal times and there is so much uncertainty that it is keeping investors positioned in the precious metals.
Wrapping up we pondered if economic data reports even matter in a meaningful way in this type of environment. Marc outlines that most of the economic data we’ve received is “too old” and lagging the real time effects of these rapidly changing conditions. He points to the consumer confidence surveys, inflation expectations, and jobs numbers as not truly capturing how the markets are reacting in the present moment.
