It seems almost every asset class has been hitting records: U.S. stocks, Japanese stocks, German stocks, bitcoin, gold.
That last one is unusual. Rising prices usually generate speculative interest in an asset, but not here: Jim Bianco of Bianco Research posts this chart showing that gold ETF holdings have actually gone down as the price has spiked higher. That’s not the only anomaly.
The dollar is rising, usually a bad sign for the yellow metal. Federal Reserve interest rate cut expectations have been subsiding. There’s usually a strong negative relationship between inflation-adjusted interest rates and gold, but gold has done well even as the 20-year TIPS rate is near the highest levels in 14 years.
“Gold’s performance over the past several weeks has been raising many questions, the most crucial of which currently is whether there is something that we are not fully accounting for,” said Joni Teves, a strategist at UBS, in a note to clients on Monday.
The answer may be in China. There’s a big arbitrage, of about $50 an ounce, between the price of gold in London and in Shanghai. (The price in Shanghai was as much as $90 higher last year.) The financial blogger who goes by the name Doomberg pointed out in a recent interview that the net effect of that arbitrage opportunity is to encourage gold to be relocated to China.
That’s happening as the U.S. and other western leaders debate whether to confiscate already frozen Russian central bank reserves to support Ukraine. There’s long been speculation that countries outside the Western system, namely but not exclusively China and Russia, want to move more of their assets outside of Washington’s long reach. Last year, the World Gold Council found that 24% of central banks wanted to increase their reserves over the next 12 months.
No one’s shorting gold.
Geopolitical turmoil, not just between Russia and Ukraine but also in Israel and Gaza, is another reason why shorts may be reluctant to bet against gold.
But there’s also the issue of physical demand for gold. With the Indian economy one of the fastest growing in the world, demand for gold has been strong, and expectations of a normal monsoon season could help crop prices and help stoke demand for gold consumption in India’s rural areas, said UBS’s Teves. There’s also been better-than-expected demand in China following the lunar new year holidays, she added.
Teves says it may be a combination of factors behind gold’s mysterious rise. “Perhaps the answer to this question is that several factors are collectively keeping gold well supported. Perhaps some segments, such as official sector buying and physical demand are stronger than we think, more than offsetting the measured selling from ETFs,” she said.
The market
U.S. stock futures
ES00,
NQ00,
advanced early Wednesday after two days of losses for the S&P 500
SPX,
dragging the index 1.1% below its record level. The yield on the 10-year Treasury
BX:TMUBMUSD10Y
rose to 4.16%.
| Key asset performance | Last | 5d | 1m | YTD | 1y |
| S&P 500 | 5,078.65 | 0.18% | 1.67% | 6.47% | 27.22% |
| Nasdaq Composite | 15,939.59 | -0.05% | 1.16% | 6.18% | 37.70% |
| 10 year Treasury | 4.163 | -10.28 | 4.00 | 28.21 | 17.08 |
| Gold | 2,135.90 | 4.52% | 4.14% | 3.09% | 17.48% |
| Oil | 78.88 | 0.75% | 6.48% | 10.58% | 3.14% |
| Data: MarketWatch. Treasury yields change expressed in basis points | |||||
The buzz
Fed Chair Jerome Powell gives the first of two days of testimony on Capitol Hill on Wednesday as the ADP estimate of private-sector payrolls and job-openings data are due for release. The Bank of Canada is seen keeping interest rates steady, and the Fed’s Beige Book of economic anecdotes is set for release at 2 p.m.
CrowdStrike stock
CRWD,
surged in premarket trade as the cybersecurity firm’s earnings and sales outlook beat Wall Street expectations.
Nordstrom stock
JWN,
declined as the retailer issued a cautious outlook, saying sales may decline this year due to economic factors including student-loan payments and higher interest rates.
Foot Locker
FL,
also issued a cautious outlook, sending shares of the athletic shoe retailer down sharply.
OpenAI says it has emails showing Elon Musk backed for-profit plans.
President Joe Biden and former President Donald Trump cruised to victories in virtually all of the Super Tuesday primaries, as Rep. Adam Schiff led the runoff to become the likely next senator from California. Nikki Haley will end her presidential run, according to reports.
Best of the web
For all of those searching about Jason Palmer, who won the American Samoa Democratic primary — MarketWatch profiled him in December.
The mysterious rise of the Chinese ecommerce giant PDD
PDD,
behind Temu
Behind the Panama Canal’s efforts to save itself.
Top tickers
Here were the top performing tickers as of 6 a.m. Eastern.
| Ticker | Security name |
|
NVDA, |
Nvidia |
|
TSLA, |
Tesla |
|
AAPL, |
Apple |
|
SMCI, |
Super Micro Computer |
|
CRWD, |
CrowdStrike Holdings |
|
TSM, |
Taiwan Semiconductor Manufacturing |
|
AMD, |
Advanced Micro Devices |
|
NIO, |
Nio |
|
GME, |
GameStop |
|
MARA, |
Marathon Digital |
Random reads
A microbe from Yellowstone’s Hot Springs could help feed the world.
One Illinois man has recovered 200 Apple Watches from scuba diving.
A 72-year-old shopper got caught in a store’s shutters and lifted into the air.
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