The gold market is moving slightly higher in early action today as stocks once again come under significant duress. As of this writing, the Dow Jones Industrial Average is down some 900 points in the last two days. The CBOE’s volatility index, or VIX, is seeing a sharp move higher and is approaching the top end of its recent range. Today’s declines have effectively wiped out gains for all major indexes for 2018.
Tech stocks are once again getting hammered, and shares of Apple are poised to close in bear market territory today after a decline of over 20% from the highs. According to cnbc.com, the popular FAANG stocks have shed some $945 billion from their highs. The article broke out their declines as:
Market capitalization losses since their 52-week highs:
- Facebook: $250 billion
- Amazon: $255 billion
- Apple: $222 billion
- Netflix: $63 billion
- Alphabet: $155 billion
The selling could have further to go as well, and right now there is no telling just how much damage may be done. Markets are facing numerous, significant headwinds including:
- Rising interest rates
- Accelerating inflation
- The war on trade
- A global economic slowdown
Not only do stocks have to contend with these and other fundamental issues, but the recent declines have also caused a significant deterioration in the technical picture. Several key stocks including Netflix, Facebook and Alphabet have entered into a “death cross” where the 50 day moving average has crossed below the 200 day moving average. This could be indicative of more selling to come before a bottom is found.
Recent price action might be suggestive of a significant asset rotation to be seen in the weeks and months ahead as it is looking increasingly likely that equities have reached a major top.
The gold market recently passed a key test as it dipped down to the psychologically important $1200 level and found buyers. The market has been in consolidation mode for the last several sessions, and appears poised to make another run higher in the coming days. Further stock market declines and rising volatility will likely fuel further buying interest in gold as investors seek out perceived safe haven assets.
The next major hurdle for the yellow metal will be the October highs around $1246 per ounce. An upside breakout above this key level could set the stage for a significant and possibly rapid run higher.
Gold Price Chart
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