One look at the headline and Josh Brown of the Reformed Broker blog tweeted his plans over the weekend to “hate read” this Barron’s story: “Gold Is Cheap. Inflation Is Coming. You Do the Math.”
Yes, gold seems to be about as divisive as politics these days.
The point of the Barron’s piece is that, in the current climate, the shiny stuff “has gotten a bad rap” and needs to be in your portfolio. This bullish stance — our call of the day — touts gold as a good defense against the impact of inflation.
“Gold was $20.67 an ounce 100 years ago and that bought a good men’s suit, Andrew Bary of Barron’s wrote. “At $1,200 an ounce, the same is true today.”
Michael Batnick, who works at Ritholtz Wealth Management along with Brown, used this chart to take exception with the gold bug perspective:
And this is a chart from @charliebilello pic.twitter.com/DDBQfmPSQh
— Michael Batnick (@michaelbatnick) September 22, 2018
Berkshire Hathaway’s BRK.A, -0.62% Warren Buffett, also not a fan.
“Gold gets dug out of the ground in Africa or someplace,” he once said. “Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
But the Barron’s bullish take stems, in part, from the fact that speculators, who are typically long gold, find themselves in a rare position of being net short. These kind of speculative positions are often seen as a contrarian indicator.
Bank of America Merrill Lynch BAC, -0.51% joins Barron’s in being upbeat on gold, calling for $1,350 an ounce by 2019.
“In the short run, the effects of strong dollar, higher rates dominate,” Francisco Blanch, head of global commodities and derivatives research told Bloomberg. “But in the long run, a huge U.S. government budget deficit is pretty positive for gold.”
Historically, gold has served nicely as a hedge against crises, like 2008 when gold surged 17% over a six-month stretch that saw the S&P SPX, -0.04% nearly get cut in half. With no shortage of bearish predictions of the bull market’s demise and the prospect of a troubling inflationary period ahead, that kind of protection may come in handy.
The market
No big move in gold GCZ8, +0.21% this morning, but it’s holding above $1,200 an ounce. Then again, the precious metal may attract some safety seeking buyers if futures on the Dow Jones Industrial Average YMZ8, -0.10% and the S&P 500 ESZ8, -0.15% keep selling off, as they are doing premarket.
Elsewhere in commodities, crude oil CLZ8, +1.73% is up nearly 2% early and the dollar is silver SIZ8, +0.04% is slipping, owing to gains for the pound GBPUSD, +0.4893% and euro EURUSD, +0.1702% .
Overseas, Europe markets SXXP, -0.24% are starting off on a sour note, following the lead on Wall Street. Holidays kept much of Asia closed, but Hong Kong stocks HSI, -1.62% had a tough day.
The buzz
It’s an M&A Monday for sure. SiriusXM SIRI, -0.43% is buying Pandora P, -3.19% in a $3.4 billion deal, with the latter’s shares up a bunch. and two big gold miners are teaming up — Randgold Resources GOLD, -1.05% RRS, +5.71% and Barrick Gold ABX, -1.41% ABX, -1.39% — to create an $18.3 billion giant. Elsewhere, Digital Realty Trust DLR, -0.76% will buy Ascenty from Great Hill Partners in a $1.8 billion transaction
While Supreme Court nominee Brett Kavanaugh’s accuser is set to appear before the Senate Judiciary Committee on Thursday, another woman — a fellow classmate of Kavanaugh’s at Yale — has emerged alleging sexual misconduct.
Read: Graham expresses doubt over Kavanaugh accuser’s story
President Trump on Tuesday will address the UN General Assembly, where, last year, he spouted out his “Rocket Man” barb. The theme of his presentation this year will be “sovereignty” and reforming international trade, according to Axios. Meanwhile, China has accused the U.S. of “trade bullyism” as the latest tariffs kick in.
As Hurricane Florence’s floodwaters recede and residents are left to pick up the pieces, a new problem arises... and it stinks:
Admit it, you never thought he’d do it again. But here he is, five years after his last victory on the Tour, Tiger Woods is back in the winner’s circle. He won the Tour Championship with a 1-over 71 to finish 11-under, two strokes ahead of Billy Horschel.
The chart
The spectre of a potential yield-curve inversion remains on the tip of trader tongues these days, and after the U.S. Treasury 2-year yield TMUBMUSD02Y, +0.46% last week reached its highest level since 2008, Wolf Richter of the Wolf Street blog illustrated why it’s still such a hot topic.
Richter, however, says it’s different this time, and the signal may not be as accurate as it has been in recent years.
“During the prior rate-hike cycles, the Fed raised much faster, and it was much more difficult for the 10-year yield TMUBMUSD10Y, +0.49% to move out of the way of the soaring and over-shooting 2-year yield,” he explained. “In this rate-hike cycle, the Fed is moving in slow-motion — everything is ‘gradual,’ as the Fed has been ceaselessly pointing out — and the 10-year yield has a chance to keep limping ahead in spurts and starts.”
The stat
50% — That’s the share of voters who oppose the confirmation of Brett Kavanaugh, up from 46% a few weeks ago. Only 40% say they’d confirm him.
The economy
Plenty for investors to sink their teeth into on the economic calendar this week, with August new home sales, an FOMC meeting and the third estimate of second-quarter GDP on the schedule. But first, we’ll get a look at the Chicago Fed National Activity Index at 8:30 a.m. Eastern followed by the Dallas Fed manufacturing survey two hours later.
Read: Economy keeps pumping, but Fed wants to let out air
The quote
“I am sick of all the chaos and the nastiness of our politics. It’s exhausting. And, frankly, it’s depressing” — Michelle Obama, speaking at a voter registration rally in Las Vegas, Nevada on Sunday.
Random reads
Apparently, slipping a woman an abortion pill is grounds for dismissal at CNN.
Speaking of CNN, the final “Parts Unknown” aired last night.
Bananas! Get your cocaine-filled bananas here!
Which artists should this Japanese billionaire take to the moon?
No sex, please... we’re Apple AAPL, -1.08% .
Some fans seem to think Kaepernick still deserves a job:
People are getting custom Kaepernick jerseys on jerseys of teams he never played for. pic.twitter.com/ICSFJuq2T6
— Darren Rovell (@darrenrovell) September 23, 2018
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