Saturday, November 23, 2024
Stocks opened higher but sold off during the day, with the sell-off accelerating after the release of the Federal Reserve's Beige Book. The Dow Jones Industrial Average was the only major index to hold on to early morning gains, closing up 13 points to 35,430. The S&P 500 lost 4 points, or 0.1%, to close at 4,551. The Nasdaq Composite gave up 0.2%, closing at 14,258, down 23 points.
Bonds were up as rates fell all across the yield curve yesterday. The two-year Treasury closed yielding 4.645%, down nine basis points. The yield on the twenty-year was off nine ticks, and it now yields 4.617%.
Oil prices rose on Wednesday, closing at $77.63 per barrel, up $1.16.
Gold prices soared on Wednesday, gapping up at the open and never looking back. The precious metal closed at $2,067.10, up $27.10.
The economy grew at a 5.2% annual rate in the third quarter. That's strong growth in any epoch. However, it contradicts the Fed Beige Book, which seemed to claim that inflation expectations have been tamed a bit but at the expense of economic growth.
Over the past several days and weeks, I've expressed confusion over the rally in gold. In early October, gold traded as low as the $1,820s. Today, it got as high as $2,073. That's nearly a 14% increase in less than two months.
I found two articles from reliable sources that attempted to explain the rally. One stated that the gold rally was caused by dollar weakness. The other claimed that the cause was the strengthening dollar.
I think the answer lies in the ever-changing economy. Gold has simply decoupled from inflation, at least for the time being. Perhaps it has been replaced with Bitcoin, or maybe inflation has exited the zeitgeist of traders and the investing public. Or, perhaps, this strong rally in gold is telling us that inflation will come roaring back, worse than ever, and soon.
