Breakdowns and Blowouts
The historical positive correlation between the SPDR Gold Trust (ticker: GLD) and the iShares 20+ Year Treasury Bond ETF (ticker:TLT), which typically rise together when interest rates fall or during traditional "risk-off" flight-to-safety environments, is breaking down.
Market spotlights
Breakdowns and Blowouts
Precious metals cannot catch a bid despite all of its great risk-off, defensive qualities while bonds are rallying. One explanation is that during the first wave of a liquidity driven market event, gold holdings are sold down to meet margin calls for less liquid exposures. During this first wave, gold simply becomes just another risk asset to be reduced, rather than hoarded.
Usually gold will bottom out in the wake of the crisis when coordinated global government interventions step-in to enact "unprecedented measures".
The ongoing de-risking across big multi-strategy firms, which has featured a sizable number of macro PM fires MTD in October, might also be adding to the selling pressure in precious.
This commentary is for informational purposes only and is not a solicitation. Past performance is not indicative of future results. Opinions expressed are those of Masterpiece Advisors, LLC as of the date of this commentary and are subject to change.
Weekly market notes every Friday from Aaron Sweeney after the closing bell.