Appetite is back as gold gets slammed

6 October, 2016

Asian equities received a boost Thursday morning as oil traded near highest levels in 4-months and the Yen fell for 7 consecutive days.

European stocks also indicated a positive open after slipping back yesterday on reports that the ECB will consider tapering its bonds purchase program by early 2017.  Although markets don’t seem really buying the news it still managed to move some asset classes especially gold which dropped by more than $50 an ounce since Tuesday.

Is the yellow metal’s rally over?

Gold has had a great performance so far in 2016, and although prices dropped by 4% since Oct-3 it’s still one of the best performing asset classes with 19.2% gains year-to-date. Of course speculations over a Fed rate hike and other central banks normalizing monetary policy are not good news for the yellow metal which benefited from a world of negative interest rates.

The recent selloff in gold was over exaggerated due to speculative positioning and breaking key technical support levels which triggered stop losses in derivatives markets. If U.S. non-farm payrolls report on Friday surprised to the upside we might see additional pressure on gold. However, I still see couple of factors likely to support prices on the short to medium term.   

  • Long term investors and physical consumers have been on standby for some time, and probably this dip will provide a good opportunity to jump in.
  • China, the largest gold consumer is on a long Golden Week holiday, and we’re likely to see some interest when markets open on Monday.
  • Demand in India picks up during the festival and wedding season that runs from October to December.
  • According to World Gold Council a recent survey showed 90% of 19 central bank reserve managers planning to increase or maintain their gold reserve levels.

Although I’m not a big fan of non-yielding assets, I still believe that gold has an important role in portfolios. There’s lot of uncertainties going into 2017, with market’s valuations overstretched, looming banking problems in the EU, Brexit’s aftermath, China’s growing mountain of debt, and the list goes on. That’s why I still believe gold is an essential asset to hedge against all those risks.    


Source link  
Markets ignoring political risks

Markets were unmoved by yesterday’s political risk events. Donald Trump's job approval rating took a hit...

The Fed continues to diverge, but is in no hurry

The greenback is falling while everything else is in green today after the Federal Reserve delivered on its promise to hike rates by 25 basis points. While this move was widely expected, many market participants...

Are you ready for some action?

Do not let the quiet session on Monday and early Tuesday fool you, volatility may be just around the corner...


Gold bears continue to dominate

Gold continues to be right in the cross hairs of the bears in the market, as US economic data continues to show a large amount of hope and as Trumps...

Oil gets hammered

Oil markets have shown they are more than capable of large movements but today's movement is the largest we've seen since July and showed...

Oil bears take a swipe

Oil has hit the headlines today after the most recent Crude Oil Inventory figures showed a surplus yet again of 1.50M barrels (3.08M exp), but more important expectations have changed in the US that there will be further use of oil resources as the winter so far has been quite mild...


USD bulls thrive in global markets

US markets continue to be a massive driver for the global economy, as economic optimism continued to pick up pace in the US sending equity markets and the USD higher...

Global risk appetite remains strong

The Australian economy continues to be a roller coaster for any Aussie bulls, but one thing is certain the markets are not paying too much attention at present with the AUDUSD being one of the stand out performers in 2017 so far.

Robust U.S. data fails to lift the greenback, what's wrong?

The strong growth in U.S. retail sales and the surge in consumer prices were expected to continue pushing the U.S. dollar higher on Thursday, but what happened was exactly the opposite, leaving many traders questioning the greenback’s uptrend...

  


Share: