Head of Commodity Strategy
Summary: Gold is currently consolidating having made it back to relative safety above $1850/oz, silver has struggled to break above $24.80/oz, while copper maintain support from strong underlying fundamentals. We have entered the time of year where profits are being defended and where lack of momentum can cause some major price swings. Markets currently lacking momentum are precious metals and more recently also platinum while copper has yet to break levels that may cause a sweat.
Gold is currently consolidating having made it back to relative safety above $1850/oz, the level below which triggered a recent slump to $1764/oz. The news flow continue to be dominated by encouraging vaccine developments, stimulus talks in the U.S. and Brexit talks in Europe. Vaccine rollouts, initially in the U.K. and soon across the Europe and the U.S. have so far been offsetting the potential for more stimulus in Europe, Japan and not the least the U.S. being added to the unprecedented amounts already having been applied to prop up economies this year.
We have, however, entered the time of year where profits are being defended and where lack of momentum can cause some major price swings. Markets currently lacking momentum are precious metals and more recently also platinum while copper still look well supported following its latest run higher.
The dollar meanwhile remains on the defensive while also highlighting the risks of an increasingly one dimensional markets with the lower dollar argument being almost entirely bound up in soaring risk appetite. The bond market is currently not sending a clear signal with the yield on U.S. 10-year Notes holding below 1%. Yesterday’s 3-year Treasury auction was weak and we have 10-year and 30-year auctions up today and tomorrow, respectively. Against the risk of rising nominal yields we still find real yields stuck deep into negative territory and yesterday the ten-year real yield temporarily dropped below -1% for the fist time since October.
Yesterday saw the first increase in flows into exchange-traded funds backed by bullion. The 118,000 ounce addition was the first noticeable increase in almost one month. During this time investors have reduced total holdings by 418,000 ounces or 3.8%. While the key level of gold support can be found at $1850/oz. the next level of resistance is $1883/os, the 38.2% retracement of the August to November correction, followed by $1900/oz.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
