Market Update July 12

Gold Price Seasonality

While there are exceptions, gold bullion prices have shown  to have a definite seasonal pattern over the years. Whether it is tied to traders selling in anticipation of buyers going away for the summer or India monsoon seasonal pattern, in our opinion it is clear that mid to late July has presented an optimal entry point into precious metals assets. 


The chart above shows the pattern with gold historically rallying into the fall. Obviously, past performance may not lead to future results.

PBOC Adds To Its Gold Reserves For 8th Consecutive Month

Per Bloomberg:

“This morning, China’s central bank added an additional 23 tons to their stockpile of gold at a period of economic and geopolitical risk, as well as a desire to move away from the US dollar. This is in line with activity around the globe, as central banks accounted for nearly a quarter of global demand as contractionary monetary policy aimed to curb rising inflation rates. Finally, worth noting that total stockpiles now sit at 2,330 tons, with around 183 tons added in the run of buying from November.”

There is a noticeable divergence between central bank gold demand, especially in the East where central banks are positioning away from the dollar, versus investment demand in the West where investors have liquidated 1.5 million ounces of gold in bullion exchange traded funds (ETF’s) year to date.

Why the World Is on the Brink of Great Disorder – Dalio

From Ray Dalio:

”We are also in a late and dangerous part of the long-term debt cycle because the levels of debt assets and debt liabilities have become so high that it is difficult to give lender-creditors a high enough interest rate relative to inflation that is adequate to make them want to hold this debt as an asset without making interest rates so high that it unacceptably hurts the borrower-debtor.”

Read his full piece in Time by clicking here.

Bankruptcy Filings Up

The count of companies with more than $50M in liabilities going bankrupt has risen significantly when comparing the 4 and 12 week moving averages.

While the overall stock market has shown strength in H12023, there are subtle signs that the broader economy may be susceptible to the Fed’s higher for longer interest rate stance.  While the banking sector has already seen challenges with three high profile failures earlier this year, the question is are we on the verge of rates causing a major inflection point for leveraged borrowers?

Source: Win, Smart CFA

Tech Sentiment Highest in 23 Years

Extreme tech sentiment – 23 years ago was right before gold took off when tech sentiment reversed.

Source: Macro Charts

Brics Reportedly to Intro New Currency Backed by Gold

According to “”, BRICS nations are set to introduce a new currency backed by gold next month at their summit in Johannesburg.

It is understandable the market will remain skeptical until official confirmation and implementation details are announced. A BRICS gold standard, in our opinion, has the potential to increase buying power of countries producing raw materials and manufactured goods while maintaining inflationary pressure in heavily indebted Western economies. 



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