London Quick Take – 23 September – Gold has diverged from bonds and the dollar

London Quick Take – 23 September – Gold has diverged from bonds and the dollar

Key Points

• Wall Street keeps posting record highs
• Nvidia jumps on $100bn investment in OpenAI
• Apple rallies on strong iPhone 17 demand signs
• Gold hits a fresh record amid divergence with bond yields and the USD

Some interesting divergence is opening up. TIPS yields and the dollar bottomed around 16 September and have bounced quite a bit since, with the 10yr TIPS yield up over 10 bps and DXY up about 1%. This ought to be negative for gold and while it did sell off briefly in tandem, it’s since rocketed past where it was to a fresh record high this morning with spot gold to $3,759. It comes as nominal US Treasury yields climbed again yesterday, with the benchmark 2-year treasury yield this morning at a more than two-week high near 3.60% and the 10yr yield also climbing to near 4.15% this morning, though this is still below the low of the May-September range. Gold is rallying because of physical demand from central banks but mainly because investors don’t buy monetary policy decisions being made chiefly to lower debt interest payments by governments that spend way beyond their means.

Wall Street closed higher despite a soft open – all three major indices posting record intra-day and closing highs.. AI is the driver of course – this time Nvidia’s plan to invest $100bn in OpenAI, the company behind ChatGPT. NVDA rose almost 4%, while fellow AI name Oracle jumped another 6%, taking its gain this month to 45%, after naming two new co-CEOs. Apple rallied 4% on strong iPhone demand signs. Wedbush raised its price target to $310, while JPMorgan raised it to $280, both citing better-than-expected sales. Apple plans to boost production of the entry-level iPhone 17 model by 30% following strong pre-orders.

European stock markets opened higher, with the FTSE 100 up about 0.25% to 9,250 and Dax and Cac both up around 0.5%. Taiwan and South Korea notched fresh record highs overnight, while Tokyo was closed for a holiday.

Trump’s new Fed governor, Stephen Miran, called for rates to be much lower. Surprise, surprise; he’s the outlier. Fed chair Jay Powell will give a more balanced view later today.