Kinesis Money Macroeconomic Analysis
This week shows the return of a ‘risk-on’ mode within the markets. As fears surrounding the new Omicron variant subside, investors are increasing their long position on the stock markets. Notably, the two main oil benchmarks showed significant rebounds this week, with West Texas Intermediate (WTI) now being traded at $71 and Brent at $75.
On the currency market, the greenback retains its strength, with the dollar index above 96. The EUR/USD trading pair, on the other hand, is being traded just below 1.13.
With a decrease in the risk sentiment related to the new Covid variant, fears about further lockdowns have also lowered. The consequence of this was a moderate recovery of the Treasury yield; the 10-year Treasury yield is close to 1.50% and up 5% since the beginning of the week. Today will confirm the yields between 1.45% and 1.50% at the 10-year Treasury auction.
Now, public focus is back on the forthcoming decisions to be made by the Federal Reserve. In just one week, the FOMC (the monetary committee for the Fed) will decide if the speed of the tapering process should increase to reduce inflationary risks.
Moreover, Christine Lagarde is expected to speak both today (with a pre-recorded message) and on Friday (at the BIS Innovation Hub Eurosystem centre setting stage), giving further insights. At the BIS Innovation Hub, Jens Weidmann will be among the guests, a banker from the Bundesbank well-known for his hawkish views.
Investors will be carefully monitoring her words and the potential conversation with Weidmann, trying to understand if the European Central Bank is planning to divert from its dovish path of the last few months.
Kinesis Money Gold Analysis
The gold price has shown little volatility in the first part of this week, remaining in the lateral trading range between $1,760 and $1,800. As noted in Monday’s comment, bullion is looking for new catalysts that could permit the price to find a clear directionality.
A surpass of either threshold, $1,760 or $1,800, could offer a first signal to investors in an unclear scenario. Indeed, the bullish momentum of gold lost its strength once investors realised the imminence of tapering. This could occur again, now that there is a possibility of an acceleration to the process.
In today’s early trading bullion gained a few dollars, as bulls attempt to take back control. For the time being, this has not been fully realised, as gold still sits in the region of $1,790, unable to surpass the $1,800 mark.
Kinesis Money Silver Analysis
In the last few weeks, the silver price was under pressure, showing a more accentuated decline in comparison with gold.
Technically, the first support zone for the grey metal is placed at $22 – $22.1 per ounce, followed by the later-September low of $21.5. Yesterday’s modest rebound to $22.5 has not yet altered the main picture; silver would need a return above $23 for its movement to be considered as a solid inversion attempt.
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Carlo Alberto De Casa is an external Market Analyst for Kinesis Money.
He also writes as a technical analyst for the Italian newspaper La Stampa.
Carlo Alberto provides regular commentary for UK outlets including the BBC, Telegraph, the Independent Bloomberg & Reuters. He is also a commentator for CNBC Italy. He worked for Bloomberg as their Equity Research Fundamental Analyst before joining brokerage ActivTrades in 2011 to specialize in currency markets and commodities. In 2014 he published a book on gold and the gold market, followed by a new updated edition in 2018.
This report is not an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance.