Kinesis Money Macroeconomic Analysis
This week, the markets are showing clear signs of anxiety tied up with the new Covid variant from South Africa; the reaction, particularly on the stock market, has been significant.
Indeed, the Nikkei, which is the main Japanese index, lost 3% in line with concerns about the new Covid strain. Meanwhile, European and American Futures contracts are posting losses between 2 and 4%. After a difficult week, gold and silver are, in fact, rebounding, as investors’ appetite for a safe haven increases.
However, the so-called ‘risk-on’ assets like oil or oceanic currencies, for example, are losing ground. West Texas Intermediate (WTI) is now being traded in the region of $75.5, having lost almost 4%. The competitor, North European Brent, has lost 3.2%, being traded at $.79.20 per barrel.
Before news about the new strain from South Africa hit the markets, the US dollar price was rising. Yesterday, the dollar index achieved a fresh-15-month high at 96.8. Earlier today, trading of the greenback partially slowed down, with the dollar index now at 96.6.
Meanwhile, the EUR/USD trading pair fell yesterday below 1.12 for the first time since the summer of 2020, before recovering this morning to rest at 1.1230. From the beginning of 2021 (YTD), the Euro has lost over 7% against the USD.
With the Thanksgiving festivities in the US, lower trading volumes were to be expected as investors are already starting to project onto next week’s busy macroeconomic agenda.
Analysing next week’s economic calendar, it will be important to note that the Eurozone inflation data will be released on Thursday. Last month, the data regarding price growth was up +4.1%, although now, the forecast is 4.4%.
Next Friday, the US Government will publish the official US unemployment rate and the nonfarm payrolls, preceded on Wednesday by the ADP National Employment report. This series of data may be important when forecasting the upcoming decisions of central banks. Higher inflation in Europe could force the European Central Bank to curb its dovish mode, while strong data in the US could accelerate tapering procedures.
Kinesis Money Gold Analysis
Bullion jumped above the $1,800 threshold in just the last few hours. The markets may fear another lockdown during the winter as Covid-19 variants could represent a massive threat.
This could force the central banks to review their exit strategies from quantitative easing, which may have the effect of slowing down tapering procedures, creating space for a bullion hike.
Earlier this week, the growing expectations for a sooner-than-expected rate hike by the FOMC – the Federal Open Market Committee – generated a decline of the bullion. This could show, once again, a strong negative correlation with the US Treasury yields.
From a technical point of view, the return of bullion above $1,800 represents a positive signal, with the next resistance placed at $1,830. From the news regarding the physical demand, we should note that the Chinese import of gold via Hong Kong in October reached a 3-year high, confirming great interest in the precious metal.
Kinesis Money Silver Analysis
The silver price is currently traded at $23.7, in a fractional gain, after a negative week. The positive momentum seen over the last few weeks has been sharply halted; the hawkish shift in the investors’ expectations comes in advance of the upcoming Federal Reserve policy decisions. Despite today’s recovery, the outlook is now slightly more fragile, as silver has fallen below some crucial levels, including the support of $24 per ounce.
If a ‘risk-off’ scenario is enacted, the chance of silver outperforming gold would be slim. Almost 50% of silver’s demand is from the industrial sector, while investment is currently lower than gold. Remember, the demand for silver in the next few years has forecasted growth. This is mostly due to their utility in the production of electric car components and from photovoltaic technology.
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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.