From what I can see there has been a small corection in miners, crude oil, and Gold hasnt maintained its gap open from Sunday night. Yesterday news came out that policy makers in China, will look to raise reserve requirements of the banks, raising concern about liquidity levels in Asia (for speculative purposes, to push prices up) and I guess also to support loans for more construction etc (which would support greater demand for commodities).
As we know there is a close relationship between commodities and the bond market. Commodities tend to rise in an inflationary environment, in which yields are required to go up(to compensate the investor in real terms) and so bond prices decline.
However momentarily there seems to be some scepticism over the recovery with the non farm payrolls result from last week, which has led to a slight improvement in demand for treasuries.
The issue in China is not something that I think will take hold of the market for long, I expect it to be forgotten in a week, if less, and for the rally in commodities to continue. This is likely to be further aided, rather than hindered, by a lack of improvent in payrolls next month, leading to hope of an extended period of low rates in the US, and more room to play out the carry trade.
My recommendation would be to see how this plays out, on the first sign of a clear resumption in the upward trend, either this week or next, I would be looking to buy into the miners.
Gold has fallen alongside the commodities sector, however from its viewpoint as a currency, there is no reason, that it should remain weak, hence I am still bullish on gold prices, especially if next months payrolls show no improvement.
Subscribe to:
Post Comments (Atom)
Also CPI to look out for on Friday.
ReplyDeleteI dont see Gold prices making a major move before March (when the decision to end or continue QE in the US is made), while the dollar stays strong. I think this is a strong dollar year, and gold being the bet against the dollar I dont see it taking out previous highs yet.
ReplyDelete