This commentary originally appeared on Real Money Pro at 1:04 p.m. ET on Thursday, Feb. 4. Click here to learn about this dynamic market information service for active traders.
Gold and gold-mining stocks continue to climb this afternoon on U.S. dollar weakness. The SPDR Gold Shares ETF (GLD) saw another inflow yesterday, and gold's $1,150-an-ounce level has bulls looking for $1,200.
I think $1,200 is still a bit optimistic, but the floor for gold might have risen given the stock market's volatility, combined with worries of negative interest rates and continued central-bank stimulus.
I thought the leverage in gold-mining stocks would kick in at the $1,200 level, but it's already starting to show up. For instance, the Market Vectors Gold Miners ETF (GDX) has rallied 11% over the past two days.
Bank stocks (especially European ones) are telling us that all is not right with the world, and even the Bank of England's most-hawkish member has fallen into line with that.
I'm not going to opine on the U.S. non-farm-payroll number due out tomorrow, but I have to think the odds of 2016 Federal Reserve interest-rate hikes are getting a lot more opaque than the lenses in Fed chair Janet Yellen's eyewear.
Energy and basic-materials stocks have dominated the rising equity indices in Europe today, as everything from aluminum to zinc has risen on the back of dollar weakness. The base-metals sector has had the most meaningful moves, led by zinc and copper. Zinc producers have done the most to bring supply into balance, and that's starting to show benefits. Nyrstar, which has already cut back production, announced a $479 million loss.
Mining stocks from BHP Billiton (BHP) to Rio Tinto (RIO) have had huge one-day gains, and Glencore (GLNCY) -- which had its debt cut to just one notch above junk status -- is up 14%.
This could continue, as short positions from the dominant CTAs continue to cover. But fundamentals haven't changed and any dollar strength will put a crimp in the rally.
Weakness in Chinese and emerging-market demand will also still dictate base metals' long-term direction. I would expect some non-U.S.-dollar-denominated producers to take advantage of any price spike to put some hedges in place.
Oil prices are stronger for a second consecutive day despite rising inventory levels. This is good news for bank stocks. Energy spreads continue to tighten, with the March/April spread for West Texas Intermediate strengthening 20 cents and the WTI/Brent spread moving 40 cents.
As I mentioned yesterday, Venezuela is trying to put together a supply meeting between the Organization of Petroleum Exporting Countries and non-OPEC exporters, but Saudi Arabia is conspicuously absent among those accepting the invitation.