The charts that matter: precious metals and bitcoin swoon

As gold and bitcoin both slide, John Stepek looks at what else has happened this week in the charts that matter the most to the global economy.

Welcome back.

This week in MoneyWeek – in a break from Covid-19 and the state of the UK’s finances (although we covered the spending review too) – my colleague Cris Sholto Heaton took a look at China’s crackdown on its tech giants and what it might mean for investors (it’s probably not good news). It’s a really fascinating story and one with a lot of insight into China’s shifting political environment. If you don’t already subscribe, get your first six issues free here.

On the podcast front, not one but two podcasts from Merryn this week. Firstly, she spoke to the fantastic Japan analyst Jonathan Allum – that’s an absolute must-listen, pick it up here.

Then Merryn joined the team at The Week Unwrapped, with – believe it or not – a good news story about the coronavirus crisis. Have a listen here.

Our latest “Too Embarrassed To Ask” video tackles the subject of “value investing”. What is it and how do you go about it? Click here to find out.

Here are the links for this week’s editions of Money Morning and other web stories you may have missed.

Now for the charts of the week.

The charts that matter

It’s been looking wobbly ever since the vaccine arrived, and this week the bottom fell out of gold. I’m still bullish for the longer run but the next bull phase for gold has to be when investors decide that inflation really is a risk. At the moment they’re caught between craving risk assets (because of the vaccine) while fearing a second-lockdown driven economy slump. Neither of those are helpful for gold demand.

Gold price chart

(Gold: three months)

Meanwhile – and this may seem surprising given gold’s slide – the US dollar index (DXY – a measure of the strength of the dollar against a basket of the currencies of its major trading partners) also fell. I say surprising, because investors often assume that gold and the dollar move in opposite directions. However, that’s not always the case. In the most recent run higher, gold and the dollar moved hand in hand. And it seems the same is true on the way down, at least for the time being.

US dollar chart

(DXY: three months)

The Chinese yuan (or renminbi) strengthened was little changed against the US currency (when the black line below rises, it means the yuan is getting weaker vs the dollar) although it has enjoyed a very strong run in recent months.

Chinese yuan chart

(Chinese yuan to the US dollar: since 25 Jun 2019)

The yield on the ten-year US government bond was little changed, which I suspect reflects the fact that despite their vaccine joy, investors aren’t keen to let go of their deflation hedges just yet.

US Treasuries chart

(Ten-year US Treasury yield: three months)

The yield on the Japanese ten-year stayed at zero, because that’s where the Japanese central bank wants it to stay.

JGB chart

(Ten-year Japanese government bond yield: three months)

And the yield on the ten-year German Bund saw the same lack of action as the US ten-year.

German Bund chart

(Ten-year Bund yield: three months)

The clear hopes for the reflation trade continued to be manifested in the copper price, which surged to a new post-Covid high this week.

Copper chart

(Copper: nine months)

The Aussie dollar climbed against the US dollar too as investors looked to get exposure to commodity currencies.

Australian dollar chart

(Aussie dollar vs US dollar exchange rate: three months)

Turns out that cryptocurrency bitcoin needed a breather this week, not the week before as I’d first pondered. The digital currency had a crack at its previous record, above $19,000 a coin, then promptly gave up a couple of thousand dollars. In the context of bitcoin, this so far just counts as a healthy correction rather than a bubble popping, but let’s see what happens next.

Bitcoin chart

(Bitcoin: three months)

US weekly jobless claims rose to 778,000, from 748,000 last week (revised up from 742,000). That’s the first time claims have risen for two weeks in a row since July. The four-week moving average rose a little to 748,500 from 743,500 the week before.

US jobless chart

(US jobless claims, four-week moving average: since Jan 2020)

The oil price (as measured by Brent crude) finally seems to be gaining traction - alongside the copper price it surged to a new post-Covid high this week. Dominic wrote about how he’s investing in it here.

Oil chart

(Brent crude oil: three months)

Amazon climbed a little this week. Just ahead of Black Friday – the big American day of discounts – the company announced that it will pay a one-off Christmas bonus to its staff. Apparently the move came amid calls for strike action over the weekend.

Amazon chart

(Amazon: three months)

And Tesla just keeps powering ahead.

Tesla chart

(Tesla: three months)

Have a great weekend.

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