Business

Following JPM's calculation that only 10% of trading is fundamentally driven by flesh-and-blood investors, and increasing rumblings that traders now exist at the mercy of machines, many of which respond merely to fund flows and not fundamentals, SocGen's Andrew Lapthorne cross-asset strategist will have you know that he will have none of that nonsense, and in a note that is sure to spark strong reactions across Wall Street, writes this morning that "with all the talk of systematic and passive investment dominating markets and, conversely, the apparently low participation of fundamentally-dr

One minute after 4am EDT, as the European market was warming up for trading, Gold suddenly plunged $12, or 1%, to $1,242 an ounce, on a surge in volume with 18k contracts, or just over $2 billion notional, trading in a one-minute window; as of 9:20am London, volumes running around 150% of recent averages. As so often happens, the gold plunge dragged silver down with it as well.

A better chart of the move comes courtesy of Nanex which shows how the sudden selling soaked up all the liquidity in the gold market in seconds, with the clear intention of repricing gold lower.

S&P futures point to a higher open following gains in Asian markets supported by stronger commodities but mostly European bourses, which are sharply higher following the €17 billion bailout of the two Veneto banks in Italy, the biggest taxpayer funded bank rescue in modern Italian history, as well as Dan Loeb's activist campaign of the world's biggest food company, Nestle which sent the stock up 5%, and finally Germany's Ifo business climate index which hit new all time highs.

Steve Saville wrote a post this week, in which he proposed a model that indicates the fundamentals of gold. According to him, these are: (1) the real interest rate, (2) the yield curve, (3) credit spreads, (4) the relative strength of the banking sector, (5) the US dollar’s exchange rate, (6) commodity prices, and (7) the bond/dollar ratio.

...Gold!

After all the concerns about interest-rate hikes curbing gold’s appeal, the metal has managed to retain its luster.

Since Dec. 15, 2015, a day before the Federal Reserve began its current cycle of U.S. rate increases, bullion has climbed 18%. The barbarous relic has outperformed the broadest measure of US stocks (NYSE composite) as the long-bond is unchanged since Dec 2015 and commodities plunging back after inflation hope fades.