This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Global Macro: Gold Pushes Higher on Volatility

NEW YORK ( TheStreet) -- Volatility returns to the marketplace as we near the much anticipated September Federal Reserve meeting. Analysts believe that September will be the chosen start date to rein in the Fed's unprecedented monetary stimulus.

The charts below highlight how assets in the futures market have reacted to uncertainty of future monetary policy. By analyzing futures, we can look at a wide range of liquid assets to determine to where money is flowing and what the current expectations for financial markets are.

The first chart below is of the gold futures. Gold has been heavily sold, as investors have priced in lower inflation expectations and a stronger dollar. An ETF that closely tracks gold futures is the SPDR Gold Shares (GLD).

[Read: <a target="blank" data-add-tracking="true" href=""><em>Marissa Mayer, Please Don't Screw Up Yahoo! Finance</em></a>]

Gold futures broke out to the upside on Thursday and look to have room to push higher. The U.S. dollar has sold off due to a lack of transparency over its future value. Similarly, the VIX, a volatility index, broke higher from its lows (as I stated in a previous article) and gold has followed it.

Gold correlates very strongly to volatility, which in turn correlates inversely to equity indexes. It is expected to see volatility and gold catch a bid together as investors have to move their money out of riskier assets during times of fear. The dollar is not an option, because investors do not want to try and outguess the Fed. Therefore, gold will continue to push higher as we approach the September meeting.

[Read: <a target="blank" data-add-tracking="true" href=""><em>Qualcomm's Still the Best Way to Play Chips</em></a>]

The next chart is of Treasury Bond Futures. Although the U.S. dollar continues to weaken, the Treasury market is persistent in pushing rates higher. Bond investors are pricing in an end to stimulus and accommodative policy in general, regardless of whether it is September or later this year.

An ETF that closely tracks bond futures is iShares Barclays 20+ Year Treasury Bond (TLT).

As can be seen in the chart below, the 20-day exponential moving average, which gives greater weight to near-term price action compared to a simple moving average, is trending strongly downward.

When the price of the long bond does cross above the moving average, it is only for a few days at most, then the price retreats. Until this trend can reverse, prices will continue to decline and rates will move to higher levels.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GLD $108.77 0.00%
SPY $198.47 0.00%
TLT $122.87 0.00%
AAPL $110.78 0.00%
FB $94.01 0.00%


Chart of I:DJI
DOW 16,776.43 +304.06 1.85%
S&P 500 1,987.05 +35.69 1.83%
NASDAQ 4,781.2640 +73.4890 1.56%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs