*Please note; The author is working from UTC +13 when determining the timeline of data releases.
This week will be excellent for gauging consumers' confidence from several critical global economies and their respective general robustness by proxy.
Besides the events detailed below, a quick note should be made on the loan prime rate decision from the People's Bank of China on Monday, which should pull investors' attention. The Chinese 1-year loan prime rate is currently set at 3.7%, and against the trend of most major economies, may still be trimmed.
US CB Consumer Confidence FEB
DE GfK Consumer Confidence MAR
The CB February report from the US is expected to show that confidence in the robustness of the US economy is shrinking. The main culprit for shrinking confidence is likely to be runaway inflation in the nation and perhaps a distrust in the fed's ability to react with the exact level of aggression needed to tame inflation.
Germany's consumer confidence report is also due Wednesday. The GfK March report is expected to show that Germans are growing in confidence in the economy. While still in negative territory, a rise to -4 from -6.7 points is expected, and with it, a possible boost in the confidence of the EUR over the long term.
The Reserve Bank of New Zealand's Interest Rate Decision is tucked away between Wednesday's confidence data. Much like the US Fed's interest rate decision due in a couple of weeks, talk concerning the RBNZ's decision centres on whether we will see a rate hike of 25 basis points or 50 basis points.
UK Gfk Consumer Confidence FEB
UK consumer confidence for February will be gauged on Friday afternoon. Like Germany, the UK's Gfk February report is expected to rise 3 points but remains negative as it moves from -19 to -16.
Like the US, inflation in the UK appears to largely drive the negativity in the confidence index. UK consumer confidence has been trending lower the past three months, so a reversal in the index value may be a bullish sign for the British economy and the GBP.
*Please note; The author is working from UTC +13 when determining the timeline of data releases.
Six significant inflation rate figures will keep investors on their toes almost every day of this week, with the most important data concentrated on Wednesday trading.
Bear in mind the expectations for most of the inflation data figures are strongly suggesting that inflationary pressure has already peaked. So, watch out for deviations from these hopeful expectations.
India Inflation Rate YoY JAN
The week opens with India's Inflation Rate YoY to January. The data is released on Tuesday morning, and the market is expecting India's Inflation Rate to rise to 6.0% from the current 5.59%.
The Indian Rupee is trading at a 7-week low against the US Dollar and a 3 ½- month low against the British Pound. The Rupee's weakness so far (and possibly to continue after Tuesday's data release) can be explained, in part, by the Reserve Bank of India less-hawkish stance than the US Federal Reserve and the Bank of England concerning raising interest rates. India's Inflation Rate hitting 6.0% isn't expected to radically alter the Reserve Bank of India's relatively less-hawkish stance.
China Inflation Rate YoY JAN
UK Inflation Rate YoY JAN
South Africa Inflation Rate YoY JAN
Expect three inflation rate data releases across Wednesday afternoon that may have the most considerable impact on this week's trading.
In order of appearance:
China's Inflation Rate YoY to January is forecast to fall from 1.5% to 1.00%.
The UK's Inflation Rate YoY to January is forecast to remain flat at 5.4%.
The direction that South Africa's Inflation Rate YoY to January is expected to head is contentious. The majority of the market expects the South African Inflation Rate to subdue a fraction of a percentage point from 5.9% to 5.7% or 5.6%. However, TradingEconomics is forecasting a rise to 6.0%.
Canada Inflation Rate YoY JAN
Canada's Inflation Rate YoY to January, released very early Thursday morning, is forecast to remain flat at 4.8%.
Thursday’s result may force investors to reconsider their exodus from the Canadian Dollar last week, as US Inflation hit a 40-year high and expectations for an aggressive US Federal Reserve response heightened.
The same forces could be in play this week but in the opposite direction. The Bank of Canada is on the edge of a more aggressive stance and hotter than expected inflation could essentially guarantee that it enacts its first post-pandemic interest rate increase on March 2.
Japan Inflation Rate YoY JAN
Closing out the week is Japan's Inflation Rate YoY to January, released mid-day Friday. The market consensus is a mild increase to 0.9% from the current Inflation Rate of 0.8%.
As Japanese companies are extremely slow to hike prices, Japan's peak inflation may lag other nations and continue to rise above 0.9% in the ensuing months. For one, the Bank of Japan is expecting inflation to hit 1.1% YoY to April, but still well under the Banks target annual inflation of 2.0%. Consequently, the Bank of Japan is expected to maintain its ultra-loose monetary policy and its -0.1% short term benchmark interest rate for the foreseeable future.
As such, it might be a shock for the Japanese Yen to improve its position from its 5-year low against the US Dollar.
We are only 20 days into 2022, and several developing events are already looking like they will become year defining. Here are 3 events that may define trading in 2022.
3 rate hikes are tentatively planned by the US Federal Reserve this year. According to Fed board members, such as Christopher Waller and Patrick Harker, 3 rate hikes is the baseline number needed to control the current level of inflation, but 4 or more hikes is definitely on the table and up for discussion if warranted.
The aggressiveness of each hike is likely to play an equally important role in trading in 2022. While 25-basis point hikes are usual for the Fed (and what is anticipated by the market), some commentators, such as Bill Ackerman, suggest that the Fed may have to double this value for its initial rate hike to help restore its institutional credibility.
The first hike is expected as early as March, but a February hike is entirely possible.
Naturally, as the cost of debt increases (via the aforementioned rate hikes from the US Fed), the growth prospects of the Nasdaq 100 can be squeezed, leading to a flat or negative year for the Nasdaq 100 index.
The last time the Nasdaq 100 had a genuinely negative year was in 2008, dropping in value by 41.9%. The Nasdaq 100 fell 1.04% in 2018, but this is arguably characterised as a flat year rather than a negative year.
With at least 3 rate hikes on the cards for the US Fed, the possibility of a negative year for the index is perhaps higher than a flat year. Bolstering this sentiment is the prediction of Jamie Dimon, CEO of JP Morgan Chase (NYSE: JPM). Dimon has floated the idea that the Fed may have to resort to six or seven rate hikes to tame the 40-year high inflation that the US is currently experiencing. However, Dimon didn’t specify if he believed all these rate hikes should take place in 2022.
Several big banks, including Goldman Sachs (NYSE: GS), predict that oil could hit $100 per barrel in 2022 or 2023.
Oil is currently in a solid position, trading between US $80 and US$90 a barrel and not far off the US $100 forecast.
Without OPEC committing to any significant increase in oil output, it looks unlikely that the price of oil will fall without a demand reduction. Yet, even with the possibility of new covid variants emerging or tightening monetary policy of some nation’s central banks, OPEC is confident in predicting that oil demand will grow by 4.2 million barrels per day over 2022.
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There is a British artist called Martin Creed whose work I like. One reason I like Creed's work is that he steers clear of connecting his work to some esoteric philosophy, like many artists (unsuccessfully?) do these days. Instead, the underlying theme for a lot of his work is indecisiveness and the fear of making the wrong decision. So, for example, rather than committing to a particular colour palette in a painting, Creed will use all the colours available in a pre-made painting set (like which, shown in the painting below). This way, he avoids the anxiety of making the wrong decision and fretting over the opportunity costs.
The connection I am making between Martin Creed and Gold is this:
There are many different methods for investing in Gold. When you can't decide on the best investment type or don't know how to evaluate the best decision, perhaps it's best to go with them all.
Like the strategy of diversifying a complete investment portfolio, you can diversify the subsections of your portfolio. In the case of Gold, the different investment options all have their specific benefits and drawbacks, incentivising diversification in the asset.
There are traditional options to gain exposure to Gold, such as physical bars and coins, ETFs, shares in mining companies, and CFDs. But a few new blockchain options have cropped up in the recent past, which could require some attention.
Blockchain Gold comes in two primary forms.
The first is the ubiquitous Bitcoin, otherwise called Digital Gold. While not precisely 'Gold', the asset has recently rebranded itself as a store of value and is seeking to usurp some of the bullion market. It is safe to say that if you had diversified into this 'Gold' at any time in the past three years (excluding the past month), your returns would have been incomparable greater than the traditional investments listed above. In this respect, I'm sure this missed opportunity has caused many investors anxiety or regret.
Tokenised Gold is the second blockchain option. It is, as its name suggest, tradable tokens backed by physical bullion held. The gold is typically stored in Central Bank-grade vaults. The advantage of tokenised Gold over physical Gold is improved liquidity. Granted this is predicated on demand for tokenised Gold and the network security remaining. However, ETFs offer a very similar product without the wild-west aspect inherent in the crypto-sphere. Even so, tokenised Gold took off in 2020, as illustrated by the above graph by Arcane Research.
Perhaps an investment in the art of Martin Creed or other artists is preferred over Gold. After all, art investments' have essentially outperformed all investment vehicles over the past few decades. Not to mention, if diversifying is your game, then the art world has your back. For example, at your local art fair, you could pick up a conservative landscape painting, while at the same time, something akin to a sculpture consisting of a banana taped to the wall.
Here's an interesting juxtaposition. There are currently just over 25 Million Currently Infected Patients of Covid-19, with 2.4 million deaths*. However,
The point is, main street continues to grapple with the Coronavirus. However, if you were looking at the financial markets, you would've thought we were in one of the largest economic expansions in history.
So much so, Warren Buffet's favourite indicator is flashing signs of mania. Currently, the U.S equity market cap is more than double the GDP of the United States. The last time this happened was during the bubble of the 2000s.
That is a long, convoluted, and somewhat poor segue to the main point of this article. A lot has happened in the past couple of days, with many asset classes at significant highs during one of the worst pandemics in history – here's an article to summarize them.
As vaccinations pick up in the United Kingdom, alongside lockdown restrictions starting to show results in lower cases and deaths, investors have been flocking the pound as optimism for the United Kingdom's economy. It is important to note that 1.45 was the bid before Brexit was announced in 2015, making it a ripe target for bulls to take.
Vaccines have played a considerable part in the strengthening in confidence in the United Kingdom, helped by the fact that they did not join the European Union's vaccine effort. This enabled them to approve and administer vaccines at a faster rate than their European counterparts.
Nearing the same time last year, we had an unprecedented event occur – traders saw the price of WTI Crude Oil on their terminals go negative. A year of supply cuts, recovering demand, and recently a rise in tensions in the middle east has pushed the black Gold back to pre-pandemic levels.
After an influx of institutional attention dawning upon the digital currency, including the likes from Mastercard, JP Morgan, Morgan Stanley, and of course, Tesla, Bitcoin has reunited with bulls taking the price up to just under $50,000 per Bitcoin. To note, Around the end of November last year, we saw Bitcoin at around $20,000.
The S&P 500 has closed at an all-time high, touching 3,950 in futures trading. The index is up 7% year to date. If we lived in an ordinary world, all-time highs in the equity markets would be the headline of the day.
However, it seems like stocks are too boring nowadays, and everyone wants to know which altcoin is next to return 1000x. However, many companies in the index are producing blowout or at least better than expected earnings. Considering the macro-environment we are currently living in, is quite an achievement.
I had concerns about the notion that investors were considering Gold's valuation – not something you want to be talked about in a safe-haven asset. I believe a safe-haven asset should be there to ballast your portfolio in times of risk-off periods, meaning investors should be able to flock to it / rely on it to hold their portfolio in steady shape.
Gold's steady decline eases my concerns, with Gold trading at around $1,816 an ounce, way off its $2,000 highs. We can see a continuation of the trend should see prices around the $1,700 - $1,750 level.
Markets are frothy – stay safe, and trade safe.
*For you tinfoil hats-wearers out there, I will entertain you by including the fact that there are up to 650,000 deaths due to the flu each year. Take that what you will
In 2020, Silver had a legendary rise from its low during the peak of the Coronavirus lockdowns in March – up over 140%. Analysts (including me) attempted to justify its price and separate its strong correlation with Gold by arguing that Biden's climate change policies will boost Solar Panels' use, which extensively uses Silver. This may be a catalyst in the longer term.
However, in the short to medium term, Silver is unlikely to be affected by this catalyst. With a new US President in the seat, alongside a decrease in Gold's price, what are we going to see in the price of Silver?
From September till the present, Silver has been fluctuating between $22.40 and $27.30 reliably. We can see clean candles to the downside from the $27 mark, predicting strong moves to the downside if it rejects that strong psychological level.
The Gold /Silver Ratio reached an all-time earlier this year when Silver's price collapsed to $11.94 when investors flew to equities out of fear of market fluctuations. The Gold/Silver Ratio is a ratio of how much silver ounces must buy a silver ounce of Gold.
With Gold quoted to rise in the medium due to inflation concerns, some analysts predict a Bull Run in 2021 for Silver. Philip Newman, a consultant at Metal Focus, stated that "We are going to see new record highs for Gold and Palladium [in 2021], but silver will see the chunkies gains,"
Like Tesla, Gold has had a legendary 2020. Gold reached all-time highs just shy of that $2,080/Oz mark before retracing in the latter part of 2020.
Gold ETF's Ballooned to over $550 Billion inflows, to the point where Gold ETF managers had nowhere to store the Gold they purchased for the ETF's.
With Gold at around the $1,850/Oz mark, investors and traders wonder what has happened to Gold and its future holds.
I believe it is quite simple – Gold did its job, and it did it well. Last year, Gold bolstered one of its essential characteristics: to be a Safe Haven. The first half of the year saw unpreceded and widespread lockdowns amidst a recessionary period across the world. Stock markets plunge, and bond yields tightened.
And, of course, Gold prices rose. As the Coronavirus worsened throughout the year, with second waves and uncertainty when the vaccine was going to come, the price rose even more. However, as things started to ease up around the world, with a vaccine in sight, Gold pulled back. Uncertainty turned into some certainty. Risk-on was back, and Gold was left to be.
Hindsight is 20/20, and it's easy to say now that Gold's price fluctuations were due to this. I would be first to say my prediction of Gold was incorrect. However, this gives us information about how Gold may react in the future.
While Gold was at its all-time highs, the world "valuation" started creeping into analysts' mouths when talking about Gold and its price; a word which I believe should not be associated with any safe-haven whatsoever, and a word which I think is a good indicator as to when to sell your safe haven asset. There should be no hesitation when switching from risk on to safe-haven assets due to the possibility that the safe-haven asset is "overvalued."
With 2021 traveling full steam ahead, amidst Capitol riots, possible impeachment hearings, and increasing Coronavirus cases in America, Gold has settled around the $1,850/Oz mark. Many analysts predict an inflationary period in the US Economy will bolster Gold's price, which still may highly be a possibility.
However, Margaret Yang, a strategist in DailyFX, believes that the market discounted inflationary pressures, and "that means the selloff in Gold could be temporary, and the downside may be cushioned by fresh stimulus to be announced by Biden."
What do you think the future holds for Gold?
Gold continues to fall on positive vaccine news, as both Pfizer and Moderna reveal trials that show 90%+ efficacy vaccines against the Coronavirus.
Gold breached a fundamental Fib level at $1,835, looking for a next internal support/resistance level at $1,800 and the 50% retracement level at $1,761.
There has been a steady outflow of Gold in Gold-backed ETF funds peaking around September, where the SPDR Gold Shares ETF held around 1,300 tonnes of Gold. However, now they are around the 1,200-tonne levels.
This sustained drop has been pushing the idea that Gold all along has been rallying on the back of a self-perpetuating notion, on consistent risk-off sentiment alongside speculation from investors.
Many have pointed to inflation and currency debasement as factors to move the yellow metal higher. However, this may be more relevant as long term trends that will see Gold push higher form a lower price in the next 3-5 years. Goldman Sachs stated that the risk of inflation is “greater than any other time since the 1970’s”, citing green spending plans in China, Europe, and in the United States with President-Elect Joe Biden at the helm.
As risk on gets into play, the rotation out of bonds and into risk-on assets will force bond yields higher, making the opportunity cost of investing in Gold lower as it does not offer income as Bonds do. Geroge Gero, a managing director at RBC Wealth Management, stated that “the fear of missing out seems to be more important,” therefore forcing some selling pressure in the Gold market.
Furthermore, Macquire bank stated that the “cyclical bull market” for Gold has come to an end, with Marcus Garvey, Macquarie’s head of metals and bulk commodity strategy, said that “[the bank] is reasonably constructive on the global growth outlook for next year, so we think Gold has passed its peak.”
Are you looking at Gold?
When all is well and good, Joe Biden is most likely to be the 46th President of the United States. We can finally put the election behind us and focus on the recovery of the economy stemming from the effects of the Coronavirus. Here is your week ahead.
The elections drew our attention in the past week. However, the Coronavirus continues to run rampant in many countries, including the United Kingdom. They recorded over 25,000 new cases on the 7t November, even after Boris Johnson implemented a 4-week lockdown. Bank of England Governor Andrew Bailey stated that the Central bank is considering other policy tools such as a path of policy and negative rates – however, it has no fixed order and time frame on when they will use them. He stated that “It will always be dependent upon the state of the world and the state of the economy.” Alongside Bailey’s speech, the UK is set to release its unemployment rate the day after, with analysts predicting an increase of the unemployment rate to 4.8%, up from 4.5% a quarter before. Furthermore, Brexit talks will continue this week, making the Cable an interesting pair to watch.
After beating the Coronavirus, China is well on its way to recovery. Economists polled by the WSJ protect the consumer price index will rise 0.75% from a year earlier, predicting a number that would be the weakest inflation reading in the past ten years. China has implemented strict Coronavirus rules in order to make sure the outbreak does not resurface. For example, schoolchildren in China must wear masks during the day, re-apply hand sanitizer, and have temperature checks three times a day. Ali Mokdad, a professor of Global Health at the University of Washington and a former official with the international health program at the Centers for Disease Control and Prevention, stated that china “have done an amazing job of controlling the virus.”
With Jacinda Ardern being elected Prime Minister, there is a general consensus that public debt will be set to increase as the government rampantly borrows in order to control the economic effects of the Coronavirus. New Zealand has generally been touted as one of the most successful countries in trying to eliminate the Coronavirus – however, it came at a great economic cost. The IMF forecasts that New Zealand’s economy is expected to fare much worse than most advanced economies, with GDP per capita is predicted to be lower in 2025 than in 2019. However, with most restrictions in New Zealand removed, many local businesses are back and operating. In October, a survey of 700 global business leaders by Bloomberg ranked New Zealand as the nation that has the best handled the pandemic and the market they would most confident investing in.
Many Central Bank leaders believe that negative interest rates are the most beneficial when the economy is recovering – and that’s what is currently happening in New Zealand. The average house price in Auckland sold for over $1 Million NZ, which means a surprise negative interest rate this week ahead; however, will most definitely send the NZ dollar downwards, which may boost economic activity.
With Joe Biden most likely taking the spot of the Presidency, markets can return back to a relative normal. It is a long recovery ahead for the United States, with Biden promising to prioritize eliminating the Coronavirus. Cases in the United States continue to run rampant, with cases reaching an all-time high at 126,000 on 7th November. It is to be seen whether Biden’s plans will materialize. With that said, the US CPI is stated to say the same at 1.7%.
The UK, Italy, France, and Germany are all experiencing second waves in their respective countries. This has forced many of them to enter a second lockdown, essentially locking in a “double-dip” recession, as CNN puts it. The European Unions GDP surged 12.1% between July and September, as restrictions eased all around the bloc. However, with restrictions coming back, these gains may be short-lived. Andrew Kenningham stated that “It is difficult to think of another occasion when such ‘good news’ will have so little to cheer” and that “the second wave of Coronavirus restrictions is about to push the single currency area into a double-dip recession”. With that said, analysts predict GDP figures to stay relatively equal at around 12.1%
Relatively quiet week ahead in comparison to previous weeks. Don’t forget to stay safe, and trade safe.
Congratulations, Joe Biden.
Gold has rallied as the election has slowly been unfolding. Currently, Gold has been hovering at $1,950. However, is this because it’s a safe haven? Or is it because Gold has a “risk-on” sentiment associated with it?
Barrick Gold seems to think it’s the former. The company, which Warren Buffet recently invested $600 Million in, recorded an almost threefold rise in third quarter profits. Mark Bristow, President of Barrick Gold stated that Gold’s price would surpass its all-time high. He states “The deep structural damage to the global economy and society at large will be with us for a lot longer, it will be like the second world war crisis,” and that
However, we can see previously that Gold has rallied with equities and that this may be the historical risk-on sentiment pushing Gold higher. Furthermore, the recent drop in the dollar is further pushing Gold higher, as the Chairman of the Federal Reserve Jerome Powell announces that the Fed is going to leave rates as is, citing that the economic outlook is “extraordinarily uncertain” and called the ever-rising cases of the Coronavirus in the United States as “particularly concerning”.
Low-interest rates worldwide have benefit house prices, which has helped boost asset prices in that market and keep money switching hands. With Nonfarm payrolls predicting a slight decrease in jobs added in the economy to 600k from 661k, volatility may continue to play out in US Dollar pairs, possibly boosting the price of Gold.
It is currently looking like a win for Biden in terms of the Presidency, which may further boost Gold asset prices on a risk-off episode.
Are you watching Gold?