Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Access both platforms from your single Saxo account.
Gold looking for a break as real yields tumble
Ole Hansen
Head of Commodity Strategy
Summary: Gold trades higher, but still within its recently established range, following a big miss on the July ADP Employment report. It has raised a few and potentially gold supportive questions about the current strong growth narrative ahead of Friday's US job report. For now it remains stuck just below resistance at $1835.
Gold trades higher, but still within its recently established range, following a big miss on the July ADP Employment which showed an increase of 330k versus 690k expected. While notoriously volatile it nevertheless has raised a few and potentially gold supportive questions about the current strong growth narrative ahead of Friday’s US job report.
Having just returned from my holiday the first question I had to ask myself was why gold was not trading quite a bit higher. During the past month US Treasury yields have seen steep declines and with inflation expectations not changing much, the inflation adjusted rate or real yield has slumped to a record low at -1.22%. Given the historical strong inverse correlation between real yields and gold, the failure this past month to respond has caused a great deal of head scratching among participants, potentially resulting in some long liquidation for fear that a recovery in yields may not be met the same level of inaction.
So far, however, yields continue to drop and with the Delta coronavirus variant once again causing lockdowns and reduced mobility in major economies such as China and the US, the market may begin to see current low yield levels potentially for longer as economic growth momentum slows and central banks become more cautious about letting the tapering genie out of the bottle. A scenario of lower yields and potentially also a weaker dollar into a slowing growth momentum could see gold once again become attractive as an additional or alternative diversifier to other assets, such as stocks and bonds.
Gold has spent the past few weeks trading within a 40 dollar range between $1795 and $1834, the latter being the 50% retracement of the June correction. A break above could initially see it target $1853 followed by the June high at $1917.
Gold’s recent failure in responding to falling real yields helped trigger renewed selling from funds during the latest reporting week to July 27. Silver meanwhile has witnessed an even greater exodus with the relative underperformance against gold moving the XAUXAG ratio back above 70 ounces of silver to one ounce of gold. As a result hedge funds recently cut their net long to just 21k lots, a 14 month low. A break back below 70 could see silver return to driving seat, thereby supporting gold in its attempt to rekindle its correlation with US real yields.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
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)