Head of Commodity Strategy
Summary: We maintain our bullish outlook for gold and with that the potential for an even greater performance by silver and platinum. The timing of the next move higher however remains highly uncertain with the prospect for additional vaccine news driving a deeper correction than the "weak" one already witnessed. Today's vaccine news from Moderna is likely to be followed by others during the next couple of weeks.
Gold dropped to a low of $1865/oz after Moderna gave its update on the Covid-19 vaccine. Together with the Pfizer/BioNTech and expected announcement from other pharma companies this week, the latest news will increase speculation that we may see a return tp normality sooner than H2 2021. However, the prospect for multiple vaccines arriving faster than anticipated still raising the risk of a policy mistake which may give the reflation trade a comeback sooner than anticipated. With this in mind we do not see this latest vaccine news as a game changer for gold and maintain a bullish outlook.
The key technical support level remains $1850/oz followed by $1835/oz, the 38.2% retracement of the March to August rally.
Precious metal section from our latest Commodity Weekly:
Precious metals’ post-U.S. election rally proved short-lived as the Pfizer vaccine news helped alter the short-term outlook. The dollar reversed higher and bond yields jumped while “safe-haven” technology stocks took a hit with the market instead buying the Russell 200 grouping of small-cap stocks, seen as a barometer of the U.S. economy and its potential recovery. Gold got caught up in this large rotation towards value from defensive assets as it forced a recovery in U.S. real rates, a key driver for gold.
We believe that the vaccine will help improve to outlook for 2021 but in the short term politicians and central bankers are likely to panic as the coronavirus case count continues to rise. Something that was highlighted by three of the world’s top central bankers after warning that the prospect of a Covid-19 vaccine isn’t enough to put an end to the economic challenges created by the pandemic.
Additional stimulus when the world is on the cusp of a scientific breakthrough on the vaccine front will likely drive inflation expectations higher next year. Not only due to an over easy liquidity situation but equally important a rise in input cost from increasing food and energy prices. With this in mind, we expect a rise in longer-dated bond yields will primarily be driven by rising inflation expectations which should leave real yields anchored deep in negative territory.
In addition to this, we still see the prospect for the dollar to weaken. Such an event will not only reduce the appetite for “safe-haven” technology stocks priced in dollars, it may also support higher EM growth and with that a pickup in demand for jewellery which suffered a 29% YoY decline in Q3 according to the World Gold Council.
In conclusion, we maintain our bullish outlook for gold and with that the potential for an even greater performance by silver and platinum. The timing of the next move higher remains highly uncertain with the prospect for additional vaccine news driving a deeper correction than the “weak” one already witnessed.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)
