Adds blog

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com.

WHY $6,666 COULD SIGNAL PEAK GOLD - SG

The record run in gold grabbed headlines last week, as market players (and journalists) scratched their heads about why gold was rising in tandem with stocks.

Prices have continued to tick higher, with gold last around $4,236.89 per ounce XAU=

Manish Kabra, lead U.S. equities and multi-asset strategist at Societe Generale, has an even higher level in mind for what which would prompt him to call peak cycle.

"Typically it peaks out when gold gives you 20% annualised returns on a rolling 10 year basis," he said, referencing previous momentum cycles.

He comes out with the rather ominous number of $6,666 per ounce, at which level he says investors can start reducing gold allocations.

He is long both the S&P 500 and gold, so what does he see behind their simultaneous rally?

"No one has been able to square the circle that the common driver behind all of this is lack of fiscal prudence from the U.S.," he said.

"They don’t say it explicitly...but (the U.S. administration) really want a weaker dollar."

Kabra points out that the last time we had a policy-driven drop in the dollar was between 1985-87, when it fell 29%.

"What do you think the S&P 500 did?"

It rose about 55% despite the assumption that it would go down, he says.

(Lucy Raitano)

*****

EARLIER LIVE MARKETS POSTS:

WHERE GOLDMAN THINKS RATES WILL BE IN 10 YEARS CLICK HERE
ARE YOU ALL WORN OUT? CLICK HERE

EUROPE BEFORE THE BELL: LOTSA EARNINGS CLICK HERE

MORNING BID: NEWS OVERLOAD SPLITS MARKETS CLICK HERE