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As gold continues to rally in 2016, one of Wall Street's most closely followed commodities watchers says we could be in the early days of a historic rally for the precious metal.
However, the catalyst for gold's gains could stem from a nerve-wracking sequence of events.
"We should expect the next global financial panic soon," said Jim Rickards on CNBC's "Futures Now" last week. "We have imploded twice in the last 16 years so get ready for the third one."
Rickards has penned numerous New York Times best sellers on the relationship between commodities and currencies. His latest book, "The New Case for Gold," defends the rationale that gold always has been, and always will be, a true safe haven during volatile times. He therefore urges investors to think of the commodity as insurance, not an investment.
He cited the financial meltdown of 2008, where U.S. banks teetered on the brink of collapse before the government's multi-billion dollar bailout. Before that, in 1998, Wall Street bailed out Long-Term Capital Management when it collapsed.
Rickards explained that, given the consistency of a financial panic every 10 years, investors should brace for another disaster in 2018. Yet, this time around, Rickards believes that its the U.S. government itself that may trigger the next crisis.
Gold, crude, stocks and bonds are rallying in lockstep, and that has created a very tricky trading environment, according to one market watcher.
Nations said that while the stock market is tethered to a lesser degree to the dollar, oil remains a main driver for equities. "That means there's no way to pick out a unique setup that is moving on fundamentals and has some technical momentum we can take advantage of."
The market has seen explosive moves across many asset classes of late. In the last three weeks the S&P 500 gained more than 4 percent and climbed within a hair of its all-time high, while crude oil is up 7 percent in the same period, steadily trading above $50 for the first time since last July. These moves coupled with gold soaring more than 5 percent since the start of June and Treasurys sitting near year-to-date highs has Nations taking a second glance at the market.
"The fact that nearly everything is at or near a critical level" makes it difficult to trade, said the founder of NationsShares and a CNBC contributor. "It makes it like a coin flip, an expensive coin flip."
As a result of the unpredictability, Nations said he is reducing his positions and closing lower conviction trades right now.
The market is getting the timing of the Fed rate hike wrong, and it could deliver a big blow to stocks, according to one hedge fund manager who's turned negative on the markets.
"The Fed funds futures are pricing in less than a 40 percent probability of a hike by the September meeting. and only a 59 percent probability of a hike this year," Matarin Capital co-founder and hedge fund manager Nili Gilbert said recently on CNBC's "Futures Now. "That is a pretty low probability given what we are seeing with a rebound in cyclicals, materials and energy."
Wall Street firms BNP Paribas and IHS Global Insight predict that a rate hike won't happen until late this year at the earliest. But while there's a markedly low chance it will happen at next week's Federal Reserve meeting, Gilbert makes the case the markets will see one as early as July.
"We actually think that the Fed may be more likely to raise rates this year than what is currently being discounted in the market, and that's because we believe that future inflation may make it increasingly difficult for monetary policy in the U.S. to remain as accommodative as it is today," she said.
Gilbert's firm, which has $740 million in assets under management, has a long/short strategies fund that claims the ability to navigate "any market," and a separate futures portfolio.
Now she's cautious and holding a large cash position.
"Our stock market outlook is somewhat negative for most countries, and that's because we expect that if the Fed has to increase rates earlier or more than what is expected, then it's going to be quite a negative surprise," she said.
The other major element she's watching: Whether Britain will decide to leave the European Union.
"The markets really haven't priced in much of a probability of Brexit," said Gilbert. "If there were a Brexit in the near term, there would certainly be a lot of uncertainty, a lot of volatility, and that just doesn't seem to be priced into the markets right now. So it could be very unsettling."
The Federal Reserve may be in a box when it comes to conducting monetary policy — a scenario likely exacerbated by disappointing jobs report numbers released last week.
Just 38,000 jobs were added to U.S. payrolls in May, the weakest performance in nearly six years. The data stoked new fears about the economy's health, and threw cold water on the Fed's recent hints at higher rates in the coming months.
"Friday's data again pushes back decisions," said Saxo Bank chief economist and chief investment officer Steen Jakobsen told CNBC recently. "The ability of the Fed to move now is almost entirely based on their 'need' or 'want.'"
Late last month, Fed chief Janet Yellen said in a speech that an interest rate hike was "appropriate" in the near term, and could rise gradually. With that in mind, Jakobsen argued the Fed has painted itself into a corner, as well as other central banks around the world.
After oil touched $50 per barrel for the first time since November, investors remain focused on the potential outcome of this week's OPEC meeting in Vienna. However, one of Wall Street's most closely followed analysts has a clear message: The event is meaningless.
"I see nothing of consequence that will be discussed at this meeting," Tom Kloza said Tuesday on CNBC's "Futures Now."
The global head of energy analysis at the Oil Price Information Service is adamant that no progress was made between Saudi Arabia and Iran during OPEC's last gathering in Doha, Qatar. Therefore, he believes that the table is not set for any sort of announcement regarding a freeze or cut in June.
"One can argue that OPEC is no longer a cartel, at least in the classic sense of a cartel having influence over supply and prices," noted Kloza in a note. So, with OPEC irrelevant in Kloza's eyes, he has turned his attention to the Federal Reserve as a key factor regarding the price of oil.
"There's no question that higher interest rates and less easy money are going to complicate the oil business," he said on "Futures Now."
The S&P 500 is in an unusual rut: It hasn't reached a new high in more than a year.
This scenario has only happened 16 times since World War II, and it's generally been seen amid deep market corrections. But investors might want to think twice about throwing in the towel.
"We looked at cases when you went this long without a new one-year high, and it's actually quite rare," Ed Clissold, chief U.S. strategist at Ned Davis Research, said recently on CNBC's "Futures Now." "There's a big dichotomy depending on how big the market declined during that one year walk through the wilderness."
The S&P last hit a yearly high — and an all-time record — of 2,134.72 on May 20, 2015. Since then, the index has fallen as much as 15 percent without hitting a new high. But Clissold doesn't find this alarming.
"If there was a really big decline greater than 20 percent during that one-year period, which is a classic bear market, actually the market really struggled after that," he said.
History shows that bigger declines have foreshadowed longer periods of recovery and smaller gains over the next year, while smaller drops have led to quicker returns to new highs and bigger gains over the subsequent year, according to Clissold.
He also points out that sentiment gauges he follows closely have shown a high level of pessimism — more than one might expect given the "small decline" we've had over the past couple of months.
"I think that would bode well for the market eventually working its way higher and breaking out to new highs," he said.
And if the Federal Reserve raises interest rates by a quarter point within the next couple of months, Clissold believes it could actually push stocks even higher.
"July seems to be more likely [than a June rate hike]. So once that uncertainty clears up one way or the other in the grand scheme of things, one rate hike probably isn't going to kill this market. So you get that uncertainty lifted and the market could move higher from there," he said.
He sees the S&P ending the year at 2,200, 5 percent above Tuesday's closing price.
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