22 Aug

US stocks, gold extend recovery

August 22, 2023

By ForexTime

  • SPX500_m returns above 4,400
  • Big Tech rebound helps S&P 500 pare biggest weekly drop since March
  • Gold resurfaces above $1900 after hitting 5-month low
  • Higher Treasury yields should be headwind for stocks, gold
  • Look out for Nvidia earnings, Powell’s speech this week

 

US stock futures are building on Monday’s gains, after a strong rebound in technology stocks.

The SPX500_m has broken past the psychologically-important 4,400 mark, making an about-turn after halting a four-day drop.

This rebound comes after global stocks had their biggest weekly drop since March last week.

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The “magnificent seven” of megacap tech stocks – Alphabet, Amazon, Apple Meta, Microsoft, Nvidia and Tesla – lost more than $900 billion in value over three consecutive weeks of falls. That was their worst run of combined market cap decline this year.

But yesterday saw Tesla jump over 7% while Nvidia rose 8.5% ahead of its results after the closing bell on Wednesday which will be a key focus.

 

Oversold gold finds a bid

Gold dipped $1885 to post a five-month low yesterday which came after four straight weeks of losses, something not seen since February.

Rampant Treasury yields are not a good sign for bullion as it is a non-interest-bearing asset.

Indeed, the 10-year “real” yield has hit 2% for the first time since March 2009. However, prices have been oversold on momentum indicators and buyers have stepped in recently as we are now seeing a third day of gains this morning.

The yellow metal still currently trades below the 200-day simple moving average (SMA), though has resurfaced above the psychologically-important $1900 level for the time being.

 

We also note that hedge funds cut their gold longs to a six-month low in the week to August 15 while ETF holdings have seen 12 straight weeks of outflows.

 

Of course, investors and traders will be wondering whether or not this rebound has legs.

Markets have half an eye on Fed Chair Powell’s speech on Friday at Jackson Hole while trying to navigate surging borrowing costs.

Higher rates for longer should be a headwind for stocks and also gold, potentially exerting an ultimate cap on how high these assets can climb.

But for now, markets are putting such thoughts aside, with US stocks and gold attempting to enter the tail-end of August on a less dour note.

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