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"In Gold We Trust"

BentinPartner Weekly

Stocks turned into a cartoon early last week after “roaring Kitty”, the retail trading celebrity re-emerged on social media triggering a returning frenzy to “meme” stocks, at least for a couple of days and long enough for some of them to issue more shares at the top.  Sanity returned after B. Gross (who was an active participant in the game) called the “meme” stocks “passé” …and after the publication of poor results on these names.


We could call it a side show but it helped fuelling risk appetite last week despite more economic evidence of exhausting consumers and abundant signs that the US economy is losing momentum.


The “Meme” stocks mania was only half of the story last week as a “better than expected” US CPI report (as anticipated by Morgan Stanley and a few others in contrast with the published survey of economists) refuelled expectations or hopes of a ‘slowing’ inflation, synonymous with reviving Fed rate cut expectations.


This magic (illusion?) will stop at some point but charts will tell us when and, in the meantime, the only “life danger” sign for investors remains to be underinvested in a market that is only too happy to climb the proverbial wall of worries.


Amidst buoyant risk appetite, the “real” story took place in the commodity and precious metals space that caught fire. Bonds did not bite the bait of a rosier inflation picture, fading an initial rally ending the week mostly unchanged for Treasuries even as Bunds kept their rally on solidifying ECB rate cuts expectations.


There are several possible interpretations. Either the bond markets vigilantes are smelling the coffee of a policy error (the Fed cutting rates before winning the inflation war for longer than one month). Or, the good inflation news did not suffice to offset international selling pressure (in a context of continued de-dollarization), or the supply is temporarily simply too large (from Treasurers locking rates now, as they have been doing a lot lately, with a very strong primary bond market.


Alternatively (or jointly), investors realize that, after all, quality stocks (that are doing best at the moment) are a fairly good inflation hedge for when the bond situation (debt overhang) becomes untenable, causing renewed accommodation, a return of QE (debt monetization), a cycle of currency devaluation and even more inflation.


For those who are unsure “against what” the dollar should decline in the DM space at least (I belong to this camp), the best inflation and debt overhang hedge remains gold and precious metals in general which broke out last week.


Gold printed a fresh all time high (across currencies) as did silver and indeed copper which witnessed a dislocation in the physical market that sent futures going from a normal contango to an 8% backwardation in one week (chart) and NYC copper diverge somewhat from LME copper prices as well. Copper is in that very special situation that it is in structural deficit, in high demand for the green transition and the object of hoarding (by Sprott ahead of the launch of its copper ETF) and accompanying speculation. A correction could be looming but copper has no change of meaningful pullback in that context and probably for months and years to come.


While US stocks traded with a heavy tone for most of the day on Friday, dragged down by signs of exhausting techs, the ongoing rebirth of Chinese stocks (due to short covering of portfolio underweights, government market & economic support), but also of Swiss (being quality shares, also supported by a weaker CHF) and UK stock markets (which are jolted by cheap valuation and a high concentration of metals producers in the index) enabled US stocks to close on a high note as well.


After meeting with French President Macron the week before, President XI met with Russian President V. Putin and the red carpet service contrasted with the sobriety of the European meeting.


Bloomberg featured an interesting article about everything Western foes are sharing with Russia which contribute to isolate the Western world from the other half the world economy and much larger share of the world population.


The highlight on Friday for all precious metals investors was the latest “In Gold We Trust Report” of Incrementum which is the Gold Bible of gold research for all investors (and not only the buyers) in the precious metal.


The report is very well worth a careful and silent reading. It makes a strong case for additional gains in the ensuing years based on exceptional demand resulting from the separation of the world in two blocs that are now disliking and splitting like never before, which will have very serious consequences (including of course for inflation going forward and the issue of debt sustainability).


The net result, besides more ominous war risks that are not even worth delving into here, whether tomorrow, next month, next year, progressively or then all of a sudden, is a growing distrust of internal purveyors of funds into SDR (ex CNY) constituent currencies (USD, EUR, JPY and GBP) as a result of the weaponization of the USD and of its satellite currencies. This is bringing a new monetary order that will be preceded by monetary disorder that may very well have started.




Over the past week, the S&P500 gained 1,7% (11,4% YTD) while the Nasdaq100 rallied 2,2% (10,3% YTD). The US small cap index gained 1,8% (3,7% YTD). AAPL rallied 3,7% (-1,4%).

The Equally Weighed SP500 gained 1,2% (6,5% YTD), underperforming the S&P500 by-0,5%. The median SP500 YTD return closed the week at -11,6%.

Cboe Volatility Index sold off by -10,4% (-2,1% YTD) to 12,19.

The Eurostoxx50 gained 0,3% (14,7%), underperforming the S&P500 by-1,3%.

Diversified EM equities (VWO) rallied 3,3% (9,2%), outperforming the S&P500 by 1,6%.


The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -0,6% (5,4%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,5% (-0,3%).


10Y US Treasuries rallied -7bps (54bps) to 4,42%. 10Y Bunds was unchanged (49bps) to 2,51%. 10Y Italian BTPs rallied -6bps (11bps) to 3,81%, outperforming Bunds by   -6bps.

US High Yield (HY) Average Spread over Treasuries dropped -1bps (-26bps) to 2,97%. US Investment Grade Average OAS dropped -1bps (-10bps) to 0,95%.

In European credit markets, EUR 5Y Senior Financial Spread dropped -2bps (-9bps) to 0,58%.


Gold rallied 4,1% (17,9%, Z-score 2,5) while Silver rallied 12,0% (32,8%, Z-score 2,4). Major Gold Mines (GDX) rallied 4,6% (18,9%, Z-score 2,2).


Goldman Sachs Commodity Index gained 1,8% (7,6%). WTI Crude gained 0,9% (11,4%).



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