Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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Metals: Momentum concerns drive volatility risk higher
Ole Hansen
Head of Commodity Strategy
Summary: Gold is currently consolidating having made it back to relative safety above $1850/oz, silver has struggled to break above $24.80/oz, while copper maintain support from strong underlying fundamentals. We have entered the time of year where profits are being defended and where lack of momentum can cause some major price swings. Markets currently lacking momentum are precious metals and more recently also platinum while copper has yet to break levels that may cause a sweat.
Gold is currently consolidating having made it back to relative safety above $1850/oz, the level below which triggered a recent slump to $1764/oz. The news flow continue to be dominated by encouraging vaccine developments, stimulus talks in the U.S. and Brexit talks in Europe. Vaccine rollouts, initially in the U.K. and soon across the Europe and the U.S. have so far been offsetting the potential for more stimulus in Europe, Japan and not the least the U.S. being added to the unprecedented amounts already having been applied to prop up economies this year.
We have, however, entered the time of year where profits are being defended and where lack of momentum can cause some major price swings. Markets currently lacking momentum are precious metals and more recently also platinum while copper still look well supported following its latest run higher.
The dollar meanwhile remains on the defensive while also highlighting the risks of an increasingly one dimensional markets with the lower dollar argument being almost entirely bound up in soaring risk appetite. The bond market is currently not sending a clear signal with the yield on U.S. 10-year Notes holding below 1%. Yesterday’s 3-year Treasury auction was weak and we have 10-year and 30-year auctions up today and tomorrow, respectively. Against the risk of rising nominal yields we still find real yields stuck deep into negative territory and yesterday the ten-year real yield temporarily dropped below -1% for the fist time since October.
Yesterday saw the first increase in flows into exchange-traded funds backed by bullion. The 118,000 ounce addition was the first noticeable increase in almost one month. During this time investors have reduced total holdings by 418,000 ounces or 3.8%. While the key level of gold support can be found at $1850/oz. the next level of resistance is $1883/os, the 38.2% retracement of the August to November correction, followed by $1900/oz.
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