Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Gold’s Reaction To Weak Economic Data Is Proof Of A Stock Market Bubble

By anyoptionCommoditiesMay 02, 2017 06:33
uk.investing.com/analysis/gold%E2%80%99s-reaction-to-weak-economic-data-is-proof-of-a-stock-market-bubble-200186360
Gold’s Reaction To Weak Economic Data Is Proof Of A Stock Market Bubble
By anyoption   |  May 02, 2017 06:33
Saved. See Saved Items.
This article has already been saved in your Saved Items
 


Gold is a favorite commodity among traders, and for good reason. As a safe haven commodity, it’s relatively simple to predict movement in the price of the metal and it is heavily correlated or negatively correlated with several other assets, making gold a signal of what’s happening in the market overall. With recent economic data released out of the United States and the effect on gold, the data is proving what many have been talking about for some time now. A dangerous bubble is forming in the stock market. Today, we’ll talk about the data, how gold reacted, why this suggests that we’re looking at a bubble in the market, and what traders should be watching for ahead.

US economic data disappoints

As mentioned above, recent economic data was released out of the United States. Unfortunately, this data wasn’t great. In particular, personal consumption expenditures or the PCE price index excluding food and energy fell 0.1% in March. That’s the largest decline we’ve seen in this index since September of 2001. In the 12 months ending on the last day of March, the core PCE price index rose by 1.6$. That’s the smallest gain we’ve seen since last July. As a result, the USD took a dive. In a statement, Richard Franulovich, senior currency strategist at Westpac Banking Corp, had the following to offer:


We’re sort of knee-deep in a soft patch of numbers… If the numbers continue to come out on the weaker side of expectations for the next two or three months, then iI would say yes, the Fed would be revising their expectations for the economy…”

How gold reacted

In general, any time we see bad news out of the United States economy, two things happen…the USD falls and gold climbs. That’s because gold, like most commodities, is priced using the USD around the world.

Therefore, when the USD falls, gold becomes more accessible worldwide, generally increasing demand and ultimately leading to gains in value. However, that’s not what’s happening. In fact, gold is having a rough day in the market today.

Why this is a troubling sign

The market has been climbing for some time, and for months now, many experts have been warning of a stock market bubble. Of course, we learned how devastating bubbles can be in any market when the real estate bubble in the United States collapsed leading to a global economic recession.

In general, when we see negative economic data, gold tends to climb. After all, a negative economy will lead to market declines, pushing safe haven investors toward the commodity. However, that’s not what’s happening. The market’s appetite for risk is at such a high point at the moment that investors seem to be blowing over the poor economic data and continuing to look for profits in the massive bubble that’s known as the market.

What traders should be watching for ahead

Moving forward, traders should be keeping a close eye on gold. Not only will gold itself present opportunities in the future, it will likely continue to be a great signal for movements in other assets ahead. So, keeping an eye on the commodity will likely create several profitable opportunities across a multitude of assets ahead.

Gold’s Reaction To Weak Economic Data Is Proof Of A Stock Market Bubble
 

Related Articles

Gold’s Reaction To Weak Economic Data Is Proof Of A Stock Market Bubble

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email