When I went outside this morning to wrangle my goats to milk them, I noticed something had changed. All of a sudden it was October. It was chilly in a way that only fall in North Florida could be, slightly drier and more temperate. While it was a cold, wet summer for the most part, the past few weeks have been the kind of hot we used to in these parts.
It’s been a strange year, normally my goats start going boy-crazy at the end of July, but this year it took until last night for it to finally occur. I’m not the only one to note this odd behavior in our dairy animals.
It’s similar to the start of Q4 every year in the markets. All of a sudden people wake up and realize the end of the year is on the horizon and it’s time to get serious about what our opinions are on the state of the markets.
After yesterday’s sell-off, yte U.S. Treasury markets are now the story. They are dragging all other markets along for whatever ride we are going on. For years we have been stuck in a binary trade of risk-on vs. risk-off with stocks and foreign currencies on one side and gold and Treasuries on the other.
As a secondary effect of this binary trade over the past eighteen months or so, gold has been tied at the hip to the euro. Weak euro, weak gold. Strong euro, strong gold.
This week, however, we’ve seen a significant move in the prices of Treasuries to the downside. And that should be a risk-off trade right? Gold should be dropping alongside the euro. But, it’s not this week. The euro is dropping while gold rallied above $1200 and continues to hold above that level while Treasuries sell off immensely.
And this is supposedly explained simply by tighter and tighter dollar liquidity circumstances because…