Stocks and Bond sell off pauses with a rise in metals
On Wednesday we saw a rest in the market slump across U.S. markets. This was followed by a rise in metals almost in tandem with the sell-off. This is somewhat expected as more cautious investors flee what they consider to be high volatility. With time we should expect to see more of this happening as investors readjust their portfolios to what they consider to be safer havens for their investments.
In the market for metals we see a rise in metals over a two day period with even copper and silver rising in price. Mid-day trading had Gold comex and spot ( GC1:COM and XAUUSD:CUR) up by 0.24% . Silver ( Sl1:COM) as well as Platinum (XPTUSD:CUR) were up by 0.61% and 0.12% respectively. The biggest shock was copper (HG1:COM) that was up by 2.5%; which may represent a break from the sideways market movement these past weeks.
All of this happened after Tuesday’s sell off in stocks. The selloff baffled many analysts as they did not see the corresponding adjustments in the market. A drop in stocks usually sees a rise in bonds and a mild rise in commodities but with the uncertainty in the Federal Reserve rate decision most investors to seek safer havens.
The rise in metals as well as the stock market already has some investors alarmed; they may be overly so. Though there has been a long term rise in the trend of most metals over the past 10 months there is a short to mid-term bear sentiment on metals. Gold (GC1:COM) for example has fallen from the month’s high of 1,354 with a great amount of resistance at 1,367. In the same breadth Silver (Sl1:COM) also has fallen from 20.138 monthly high and met a great amount of resistance prior at the 20.470 level meaning an uptrend is no likely. Platinum (XPTUSD:CUR) is in a full on bear market. With a long term outlook that contradicts the short term fears of some investors means that we are not looking at a recessionary period but a period of readjustment.
We will see momentary rises in the metals that really indicate the absorption of capital from stocks and bonds as investors adjust their expectations. With the pending Federal Reserve rate decision this type of move should become more and more common. Therefore it would be wrong to say that metals are an indication of market events but rather that they are responding to market events elsewhere.
Though there isn’t need for alarm it would be good to diversify and invest in safer havens just in case there is some turbulence to come.