Copper and Gold Fly While US Dollar Scratches Its Head

In today’s Fat Tail Daily, US interest rates have fallen sharply over the last six months, but the long-term trend still remains up. Until a clearer picture of future rates emerges the US dollar will tread water and commodities may struggle to run apart from copper and gold.

In today’s Closing Bell, Murray looks at US 2-year bond yields, copper, gold and the S&P 500.

As a trader, I find constantly commentating on markets a bit strange.

After many years of trial and error, I have come to the conclusion that effective trading involves understanding when to get involved and when to sit on the sidelines.

My goal with these weekly videos is to show you some of my trading rules so you can see the logic behind the trading model I use. I hope that you follow along as I make different calls about markets or stocks that I think are ready to move.

While I record these videos every week, I only get a high level of conviction on trade ideas every now and again.

So most of the time I will discuss general market conditions and point out levels above and below the market that could lead to changes or continuation of trends.

Switching back and forth between high levels of conviction and the usual market commentator fodder is a tricky business because I want to make sure you know that there is a difference between the two.

My recent call expecting a sharp fall in iron ore was a high conviction view, whereas this week I cover markets without expressing a strong view at all.

In today’s Closing Bell I look at the stalemate in US interest rates and the US dollar.

Despite the decline in market interest rates over the past six months, US 2-year and 10-year bond yields are still trending up on my long-term charts.

The US dollar has been treading water for a year waiting for clearer signs of the path ahead for rates.

Stocks have run ahead based on these falling rates, but that run could be premature given the long-term trend of higher rates is still intact.

But the bottom line is that US and Australian stocks are trending up, and as long as that remains the case, I remain bullish. But interest rates are still a wild card that could surprise markets if inflation continues to cause a problem. So, like all good traders, I’m staying flexible and ready to change my mind if and when the facts change.

The recent jump in copper prices is worth looking into. It’s held up remarkably well over the last year while other commodities were getting belted. This is often a hint that when conditions change, copper could outperform on the next broad commodity rally.

I show you the long-term chart of copper using a logarithmic scale in the video above.

Gold is also looking hot but is testing areas of resistance above the range of the past three years. My trading model picks up areas of resistance outside of a range using Fibonacci extension levels.

In today’s video, I explain why I’m bullish on gold, and what has to happen to change my view.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Murray Dawes is our resident expert trader and portfolio managers. He is a former Sydney Futures Exchange floor trader who went on to design custom trading systems and strategies for ultra-wealthy clients (including one of Australia’s richest families). Today, his mission is to help ordinary Aussie investors make profitable investments, while expertly managing risk.

He uses his proprietary system for his more conversative and longer-term-focused service Retirement Trader…and then applies the same system to the ultra-speculative end of the Australian market in Fat Tail Microcaps (this service is strictly limited and via invitation only).