US Open – Gold’s record-breaking rally, Stocks modest rebound, Oil stronger on weaker dollar

US stocks are rebounding as investors shrug off virus worries and remain focused with the prospect of at least a $1 trillion fiscal stimulus deal this week, high hopes the Fed will show they will provide longer-run accommodation, and ahead of the busiest week for earnings seasons which includes reports from Amazon, Alphabet, and Apple. 

The virus picture in the US is mixed as several daily updates are noisy and make it seem the virus is showing no signs of slowing.  Florida the current epicenter, saw their largest number of deaths over the past day, while several counties in California struggle to contain the virus.  US case numbers through Sunday posted the first seven-day decline since early June and provide some hope the second wave is cresting. 

FX

Someone needs to throw in the towel for the dollar.  Bearish bets are mounting and that might not ease for the coming weeks.  The dollar could have its worst July in ten years and that is accelerating as the euro takes over its role as a safe-haven.  Europe did a better job handling the virus, EU leaders have better momentum now regarding fiscal support, and the Fed is poised to deliver a lot more stimulus than the ECB.  The euro seems destined for 1.20 as long as Europe is able to contain resurgences of the virus 

Oil

Oil prices are higher today mainly on increased bets the US dollar will continue to slide.  Over the weekend, Hurricane Hanna made landfall as the first Atlantic hurricane of the year.  Now a tropical depression, Hanna did not affect Gulf of Mexico oil output.    

WTI crude remains trapped in the low-$40s as virus uncertainty could keep demand tepid and as deteriorating relations between the US and China could jeopardize the phase-one trade deal, which would diminish global demand outlook. 

Gold

Gold had an easy time rising above record high territory and it could continue as the Fed will likely signal more accommodation is needed.  The bullish case for gold’s checklist has almost every box checked off: No end in sight for stimulus is in place, the dollar is in freefall, real rates slide deeper into negative territory, virus uncertainty will remain elevated the consensus is a fresh wave will happen in Autumn, and as geopolitical tensions from Beijing to Washington DC show no signs of easing. 

Everyone has their eyes on the $2000 level for gold, but the rally should take a break until we get passed the Fed on Wednesday.  The next big risk event will be a trifecta of earnings from Amazon, Alphabet, and Apple.  Gold should see modest profit-taking here, but could the climb higher over the coming weeks.  

Bitcoin

Bitcoin is back above $10,000 and the party might continue. The dollar’s demise is 100% responsible for the rise in cryptocurrencies and the Fed could deliver another signal more accommodation is here and for longer. If the dollar rout continues, Bitcoin should rise to the $12,000 level.

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