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.
Will he or won’t he? Gold thinks he will...
Ole Hansen
Head of Commodity Strategy
Gold is trading back above $1,200/oz ahead of the expected announcement from the White House that China is about to get hit by additional tariffs on goods valued at up to $200 billion. The latest US trade balance for July showed the US in the red by $50.1 billion while the trade deficit with China rose to a fresh record of $36.8 billion.
With his domestic agenda being challenged by the upcoming midterm elections, less-than-flattering comments from White House insiders, and the ongoing Mueller investigation, President Trump is unlikely to step back from his fight with the Chinese.
The prospect of an escalated trade war continues to make matters worse for emerging market bonds, stocks and currencies. The MSCI emerging market stock index is down by almost 20% since January while the MSCI EM currency index has lost 8.5% of its value since April when the focus turned to trade tensions.
While industrial metals have had a rough ride this week from the prospect of global growth and demand being negatively impacted we have seen gold continue to stabiliae. As a result of these developments the Gold-HG copper ratio touched a two-year high at 4.6 while silver at one point touched a two-decade low against gold after the gold-silver ratio reached 85.
The prospect of an escalated trade war continues to make matters worse for emerging market bonds, stocks and currencies. The MSCI emerging market stock index is down by almost 20% since January while the MSCI EM currency index has lost 8.5% of its value since April when the focus turned to trade tensions.
While industrial metals have had a rough ride this week from the prospect of global growth and demand being negatively impacted we have seen gold continue to stabiliae. As a result of these developments the Gold-HG copper ratio touched a two-year high at 4.6 while silver at one point touched a two-decade low against gold after the gold-silver ratio reached 85.
In the week to August 28, funds bought gold for the first time in 11 weeks. The 9,000-lot reduction of what was a record short, however, was still small compared with the 143,000 lots sold since June. We conclude, as mentioned in recent updates, that a bigger move is needed before short sellers start to worry.
Funds are short gold in response to a stronger dollar, rising US interest rates, and the increased need to be invested where strong liquidity can offer a certain amount of protection.
The US stock market and the dollar both tick that box and as long we do not see any contagion into the US market from the market turmoil seen elsewhere gold may struggle to find a bid strong enough to take it higher. However, a break above $1,220/oz as per the chart above is likely to attract some additional buying but whether it will be strong enough the get the short-covering wheel to accelerate remains to be seen.
Funds are short gold in response to a stronger dollar, rising US interest rates, and the increased need to be invested where strong liquidity can offer a certain amount of protection.
The US stock market and the dollar both tick that box and as long we do not see any contagion into the US market from the market turmoil seen elsewhere gold may struggle to find a bid strong enough to take it higher. However, a break above $1,220/oz as per the chart above is likely to attract some additional buying but whether it will be strong enough the get the short-covering wheel to accelerate remains to be seen.
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)