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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Global Macro: Commodities Are Acting as if Rates Are Going Higher

NEW YORK (TheStreet) -- As the Federal Reserve meeting approaches this Wednesday, low volumes and declining interest rates are leading to surprising correlations among financial markets.

For investors looking to see the negative effects in assets tied to tighter monetary policy, they can continue looking.

Equities are at record highs and investors continue to buy treasuries and sell U.S. dollars. Although it can be said that much of the cut for future bond purchases is already priced in, only commodities look to be acting as if the future holds higher rate.

The first chart below is of SPDR Gold Shares (GLD).

The decline in gold prices is partially due to the easing of Western tension over the Syrian conflict. Gold spiked higher as investors feared potential military intervention in the Middle East in late August, which would have led to volatile market trading.

What can be seen now is that rates are declining, gold is falling and the dollar is reaching yearly lows. The low volumes leading up to Fed events generally cause correlations to loosen as investors sell particular assets in aggregate and buy up others.

Currently equities and bonds are showing strength, as the fear that once existed over stimulus cuts has diminished considerably.

Regardless of the fundamental reasons surrounding gold's fall, the fact is that gold has broken a strong upward channel support and has room to fall further. If rates do begin to rise and the dollar catches a bid, expect gold to push toward its July lows.



The next chart is of the United States Oil Price (USO).

Like the gold chart above, the premium in oil due to the Syrian conflict has largely diminished, which has led to the vast decline in prices over the past few weeks.

Although oil and interest rates tend to negatively correlate as well, irregular behavior due to the Fed policy meeting is likewise having adverse affects on this relationship.

The difference between gold and oil, however, is that oil prices have yet to break its channel-support range. That is not to say prices won't eventually breakdown, it is just that oil has had relative strength vs. gold recently.

If rates do rise because of the Fed decision on Wednesday, look for both commodities above to show weakness and drag down with them other assets, such as equities and bonds.

At the time of publication the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a graduate of Georgetown University, where he earned a degree in Economics.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,915.07 -70.54 -0.42%
S&P 500 1,964.68 -8.15 -0.41%
NASDAQ 4,396.2040 -22.83 -0.52%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs