Market Update 3 May 2013: Long Bonds at Critical Support


This week the markets shifted back into forward gear, with all assets except Bitcoin and the 20 year Treasury Bond advancing. Coffee and copper were especially strong.

Bitcoin started the week in an uptrend; trading at over 3 g on Monday, it declined through the week to close at 1.93 g, down 31%. Since early April, the BTC has made a series of lower highs and higher lows; over the next few weeks the market should make up its mind about whether Bitcoin is overvalued or undervalued at these levels. Keep in mind that it could drop by 75% and still be in an exponential uptrend. Expect continued volatility!

Among the government currencies, the JPY was strongest, gaining 2% (less than half of last week's loss), while the USD was weakest, gaining only 0.2% to 21.2 mg; this is 30.1% above its half-life curve, and continues to present an excellent selling opportunity for those holding USD assets.

Bonds were mixed, with short term SHY little changed (up 0.1%, even less than the rise in the underlying USD), while the long term TLT lost 1.6% to close at 2.56 g. This leaves TLT right on its support level at 2.55 g. If TLT bounces off this support and heads higher, we could quickly see prices in the 2.8 to 3.0 g region, but if the support fails to hold, prices will probably head to 2.35 g or lower.

TLT in gold

Stocks were all higher, led by the S&P 500, which rose 2.2% to close at 34.18 g. Despite the strong rally in the JPY, the Nikkei Index gained only 0.6%. The HUI Gold Bugs Index advanced on Monday and Tuesday to over 6 g, but declined through the rest of the week to close up 0.4% at 5.87 g.

Commodities were higher, led by Coffee, which regained about half of last week's loss to close at 29.7 mg, up 4.9%. Copper also showed strength, gaining 4.2% for the week. Silver was the weakest of the commodities, adding 1.1% to close at 0.513 mg/oz.  Platinum rose 1.4% to close the week at 31.78 g/oz, 2.2% above parity with gold.

Table of prices in gold for week ending 3-May-2013

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