[Chart courtesy of MarketWatch.com]

1. Moving the markets

I could not help but laugh out loud last Friday afternoon when one of the greatest gold haters, namely Warren Buffett, disclosed in his Berkshire Hathaway’s latest 13F filing that he liquidated huge amounts of US Bank stocks, and replaced them as follows:

Berkshire took a new stake (20.9 million shares) in Barrick Gold, a holding that was valued at about $564 million at the end of that period.

Say what? After mocking those who believe in the soundness of gold for decades, he appeared to have flipped, which to me means that he is clearly seeing what reckless money printing will eventually do to the purchasing power of a currency.

“(Gold) gets dug out of the ground in Africa, or someplace. 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.”

Warren Buffett in 1998.

I find it amusing that he is finally seeing the light, and his purchase lit the fire under gold during this session, as the precious metal managed to almost reclaim its recently lost $2,000 level. Still, a gain of +2.19% make this a satisfying day.

The Nasdaq set a new intraday record, came off its high but still closed the session with a solid 1% gain, thereby outperforming the S&P (+0.27%) and the Dow (-0.31%), but lagging when compared to Gold’s superior feat. Gold’s move was helped by a drop in the US dollar, which touched its late July lows.

The S&P 500 remains stuck within 1% of its all-time high from February and clearly needs a new driver to propel it past that level, which it has now touched several times.

Quipped ZeroHedge tongue in cheek:

Tick-tock, time’s up for the dead-cat bounce…

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

While the Dow never managed to climb above its unchanged line, the S&P 500 showed some promising early gains, only to give them back late in the session. However, the Nasdaq resisted red numbers and closed in the green, along with GLD, which added a solid +2.36% for the session.

The latest jobs numbers showed initial claims falling below 1 million for the first time in 21 weeks, but still came in at a horrific 963k vs. 1.1 million expected.

Added ZH:

A total of 56.29 million Americans have now applied for jobless benefits for the first time since the pandemic lockdowns began (that’s over 360 layoffs for every COVID death in America), and massively more than the 22.1 million during the great financial crisis.

However, Despite today’s relatively positive news (yes 963,000 Americans still filed for first time benefits), following President Trump’s EOs, leaving the latest round of virus relief continuing to be stuck in gridlock, we suspect things will get depressingly worse before they get better.

That looks to be a possibility, as the ongoing impasse over Covid-19 relief is likely to drag into September with most lawmakers having retreated to their home states. In other words, we’ll have to wait for the next jawboning event.

This lack of action is what keeps the markets bouncing around with the S&P 500 continuing to sniff at its all-time high but falling short of closing above it.

Not helping sentiment at all was the 30-year Treasury auction, which bombed, as yields spiked to a level last seen early July and thereby taking the steam out of the early equity rally. It was an oddity to see bonds down and gold up, since both usually run in tandem.

Oh well, I sure don’t mind seeing gold to be the winner in this battle.

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

Yesterday’s sell-off now appears in the rear-view mirror as a vanishing object, as the major indexes stormed back and ended solidly in the green. The S&P 500 closed just shy of a new record, although it broke the old high set on February 19 on an intra-day basis.

Surely, the move was not based on fundamentals, which are way out of whack, as Bloomberg demonstrates here, while explaining the real reason in this chart. Of course, for readers of this blog, this is nothing new but merely a refresher.

Gold lagged the entire session, thanks to higher bond yields, and pulled back into close to end the day in the red. Reviewing yesterday’s performance, and the importance of gold in the bigger picture, was Rabobank’s Michael Every:

Meanwhile, markets did wobble yesterday for entirely different reasons, with one of the key ones being that 10-year US Treasuries are now back up to 0.65%, which makes holding everything else that much less attractive. Including gold, which was supposed to be showing us that inflation was everywhere ahead (not just in assets) and that the USD was over. Yes, being below $1,900 and not above $2,000 is just a small detail in a far bigger picture, but it does underline that nothing is rock solid day-to-day – even metal.

That the precious metal will have a great future was further underscored today, as news that the Budget Deficit has hit a record caused ZH to comment:

On a YTD basis, 10 months into the 2020 fiscal year, the US has spent $5.631 trillion and collected just $2.824 trillion, which means that YTD outlays are a record 100% higher than receipts, which also includes the $8.3BN received last month and $63.4BN YTD in deposits of earnings by the Fed.

Ouch! And considering that this trend will not end soon, gold remains an important component in everyone’s portfolio, but it also means that sharp corrections will be inevitable.

Author and gold bug Peter Schiff saw yesterday’s sell-off this way:

What the market is doing is trying to flush out the weaker players. When it comes to a bear market, it’s trying to create some hope and sucker people back into the market by having a really big rally. Well, in a bull market it’s the opposite. The market is trying to instill fear in the weaker hands, so you get these spectacular one-day moves in the opposite direction of the primary trend to shake people out, to get the weaker players out of the market so you can clear away the excess baggage and then continue the trend.

In the meantime, equities remain in bullish mode, despite the Washington stalemate about a new coronavirus package with legal challenges about Trump’s executive orders to extend spending measures waiting on deck.

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