Tips for traders, 9 June 2020
Besides the job data, we see that the consumption of crude oil went back up last week and the inventory reduced significantly compared to the previous month’s data. This indicates that the consumption of energy increased again last week, but on the other hand, this does not necessarily indicate the economy is recovering given that the unemployment rate remains high.
Many participants in markets might think that the economy is recovering which is certainly endorsed by the president of the US, Donald Trump. By endorsing the condition, it just shows that the economy is not in a very good shape; appreciation of stocks is mainly caused by flooding liquidity into the market.
This current condition of flooding is a bit different from what happened a decade ago where money flowed to most financial instruments. This time, money flows to certain financial instruments and in particular the stock market. We have not seen gold move in a clear direction in the past six weeks. That said, the volatility of gold remains high, traded between $1680 and $1750/troy ounce.
Beware of any reversal that might be in process. Various assets appear overvalued, while there are some that are still undervalued. By keeping ourselves aware of this, we can gain an advantage by capitalizing on such opportunities. We expect to see some volatility in the upcoming weeks to months.