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Jim Cramer: Endless Gold-Buying Signals Fear


By    |   Monday, 06 January 2020 04:41 PM

Investment guru Jim Cramer says Wall Street seems to be underestimating the potential fallout from rising tensions between the United States and Iran.

“When I see this endless buying for gold it makes me think for the first time people are just saying, ‘I’m really fearful,’” Cramer asked on CNBC.

Gold prices shot to an almost seven-year high on Monday as U.S.-Iranian tensions drove demand for safe-haven assets and pushed a gauge of global equity markets lower, but shares on Wall Street rebounded on a less worrisome view of events, Reuters reported.

Cramer said on “Squawk on the Street” that the key to the stock market is: “Gold, gold, gold.”

Often in times of international strife, investors buy gold and U.S. bonds as perceived safety from historically riskier investments such as stocks.

“It’s not just Treasurys. The gold buying has been endless; over and over and over. It feels like gold wants to go to $1,700 to $1,800. Now that would be very negative for the [stock] market,” Cramer added.

Cramer on Monday asked, rhetorically, “Why aren’t the futures down more? They should be. I think they should be because we haven’t see what promises to be retaliation?”

“I don’t think Iran is a paper tiger,” the “Mad Money” host said. “Do they not have to do something after all the bluster?”

Meanwhile, oil rose and the dollar weakened after the U.S. killing last week of General Qassem Soleimani, the architect of Iran's drive to extend its influence across the Middle East. The death raised worldwide concerns that a regional conflict could erupt.

Iran's supreme leader, Ayatollah Ali Khamenei, wept in grief as hundreds of thousands of mourners thronged Tehran's streets for Soleimani's funeral, and the slain military commander's successor vowed to expel U.S. forces from the region in revenge.

Wall Street finished higher after reversing early declines and gains accelerated into the close, a sign investors were less concerned about the potential for rising hostilities.

The market's recovery from the 9/11 attacks in 2001 and the financial crisis a decade ago have made it easier to take lesser events in stride, said David Kelly, chief global strategist at JPMorgan Asset Management.

"This is a case that the market is probably under-reacting to a threat because we don't know what the Iranians may do to retaliate, and we don't know how the U.S. administration may respond," he said.

It is important not to get lulled into complacency because there is additional risk in the equity market after Soleimani's death and high stock valuations, Kelly said.

"In the past if you have a big increase in uncertainty, the market sells off first and asks questions later. We're in a different situation now," he said.

The Dow Jones Industrial Average rose 68.5 points, or 0.24%, to 28,703.38. The S&P 500 gained 11.43 points, or 0.35%, to 3,246.28 and the Nasdaq Composite added 50.70 points, or 0.56%, to 9,071.47.

Adding to tensions, Iran said it was taking another step back from its commitments under the 2015 nuclear deal with six powers that Washington withdrew from in 2018.

Spot gold hit $1,582.59 an ounce, its highest price since April 2013, but the precious metal later pared gains.

U.S. gold futures settled 1.2% higher at $1,568.80.

Edward Moya, senior market analyst at OANDA in New York, said the market is still digesting the implications of the Iran events. "We're having a little softness in the dollar against safe-haven currencies, but I think risk appetite will return. If Iran does retaliate, they know they're toast," Moya said.

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Investment guru Jim Cramer says Wall Street seems to be underestimating the potential fallout from rising tensions between the United States and Iran.
jim cramer, gold, market, fear
Monday, 06 January 2020 04:41 PM
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