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World is 'on the cusp of new inflationary era' and adjustment to higher rates won't be easy, warns BIS
In its new outlook, the Bank for International Settlements (BIS) said inflation wouldn't be returning to normal anytime soon, and the world will have trouble adjusting to the new global rate hike cycle.
"After more than a decade of struggling to bring inflation up to target, central banks now face the opposite problem," said the BIS general manager Agustín Carstens. "We may be on the cusp of a new inflationary era. Central banks need to adjust to this new environment, not least by raising policy rates to more appropriate levels. The world economy must learn to rely less on expansionary monetary policies."
One important theme is the retreat of a globalized world, which played a big part in creating deflationary forces during the previous couple of decades.
"Many of the forces behind high inflation remain in place, and new ones are emerging. There are already signs of increased price spillovers across sectors and between prices and wages, as is common in a high-inflation environment," Carstens noted. "The structural factors keeping inflation low in recent decades may wane as globalization retreats."
The report noted the risks to watch are anchoring of inflation expectations and a wage-price spiral. Read More
The Degussa CEO gives us his current assessment of the gold market
Andreas Habluetzel CEO of the largest precious metals retailer in Europe Degussa gold has been giving his comments on client activity and the state of the current gold market.
When asked about how the situation between Russia and Ukraine affected the market Habluetzel noted "Russia physically delivers about 10 percent of the worldwide market in gold. That has been taken out of the market now. It is not a big thing for Degussa even if we feel the shortage. It is a bigger problem for the refineries. Physical gold can also be lent out against interest. That rate has now doubled. That has caused stress in the market.". He added "The lack of gold should not be anything decisive for Swiss refineries given that they have a larger problem. Russia is a very strong partner with regard to palladium."
When asked about the demand due to the conflict he said "The demand for physical gold has been high since the start of the pandemic in spring 2020. It tailed off at the end of last year when things started to normalize. The Ukraine war has significantly increased interest. But it is mostly private investors that are buying gold. Institutions have not been increasing their stocks much because of Russia. They have been invested in the metal for a long time." Read More
Hold commodities and half of it should be in gold as economic risks rise - Société Générale
The Federal Reserve is embarking on an aggressive monetary policy tightening cycle and one international bank is advising investors to maximize their commodity exposure, including exposure to gold.
In a report published by Société Générale, the bank said it currently holds a maximum allocation of 5% of gold in its Multi-Asset Portfolio, representing half of its commodity exposure. The comment comes as gold prices continue to consolidate between $1,900 and $1,950 an ounce; however, SocGen analysts expect to see a break out to the upside within the next three months.
“High inflation and lower rates suggest that gold will hit record highs. Indeed, we expect gold to reach $2,200/oz in2Q,” the analysts said.
Looking at the other half of its commodity exposure, SocGen analysts said they prefer rotating out of the energy sector and into base metals like copper. The bank also likes silver as an industrial metal.
“To protect portfolios, buying oil is no longer the panacea, as if central banks react too strongly to inflation pressures building up in the economy, they could push the economy into recession leading to a $60/b oil price,” the analysts said. Read More
Gold, silver up as U.S. bond yields, stock indexes down
Gold and silver prices are higher in midday U.S. trading Thursday, lifted by bullish outside market forces on this day that include a dip in U.S. Treasury yields and a sell-off in U.S. stock indexes. A drop in cryptocurrencies late this week is also likely benefiting the gold and silver market bulls. June gold futures were last up $16.40 at $1,939.40 and May Comex silver was last up $0.202 at $24.655 an ounce.
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Technically, April gold futures bulls have the overall near-term technical advantage amid recent sideways and choppy trading. Bulls' next upside price objective is to produce a close above solid resistance at $1,967.20. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the March low of $1,888.30. First resistance is seen at today's high of $1,941.70 and then at $1,950.00. First support is seen at today's low of $1,923.30 and then at this week's low of $1,916.20. Wyckoff's Market Rating: 6.0
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Image Source: Kitco News
May silver futures bulls have a slight overall near-term technical advantage. However, prices are in a four-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $26.16 an ounce. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at $25.00 and then at this week's high of $25.11. Next support is seen at today's low of $24.335 and then at this week's low of $24.20. Wyckoff's Market Rating: 5.5. Read More
Gold moves higher as investors refocus on inflation and Ukraine
Unquestionably market sentiment oscillates amongst the investment community focusing upon inflationary pressures and Ukraine or on the Federal Reserve’s tightening of their monetary policy. Inflationary pressures and the war in Ukraine create bullish market sentiment for the safe-haven asset class, specifically gold. In contrast, reactions to the Federal Reserve’s monetary policy, which includes a series of rate hikes and runoff of their balance sheet assets, lead to bearish market sentiment in gold.
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It seems that from day to day, market participants will move back and forth between these factors. As for today, market participants are once again putting their primary focus on the inflation continuing to move higher and the war in Ukraine. In regards to the war, it seems highly unlikely that a peaceful resolution will be forthcoming any time soon. Rather concerns have emerged over the excessive military action and targeting of civilians in Ukraine. The war in Ukraine has also affected levels of global inflation, taking them higher. Currently, Ukraine and Russia collectively export a large percentage of wheat and other agricultural products to countries in the European Union, and the war has pressured agricultural products such as wheat higher.
As of 4:10 PM EDT, gold futures basis most active June 2022 contract is up to $11.50 or 0.60% and is currently fixed at $1934.80. Gold traded to a high today of $1941.70 and a low of $1923.30. Concurrently the dollar has been extremely strong this weekend, providing moderate headwinds for gold prices. The entire precious metals complex on the futures markets has shown gains on the day. Read More
Silver is trading higher ahead of the European open
Gold is trading flat ahead of the European open at $1929/oz. Silver is marginally higher trading at $24.60/oz. Elsewhere in the commodities complex, copper is 0.44% higher and spot WTI fell 0.22%.
Risk sentiment overnight was pretty positive. The Nikkei 225 (0.36%), ASX (0.47%) and Shanghai Composite (0.32%) all closed higher. Futures in Europe are indicating a positive cash open.
In FX markets, EUR/USD is extending to the downside and trades at 1.0860. The biggest mover is GBP/USD which is down 0.24%. In the crypto space, BTC/USD is 0.21% higher at $43,537.
News from overnight: Read More
Disclaimer: These articles are provided for informational purposes only. They are not offered or intended to be used as legal, tax, investment, financial, or any other advice.
