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The gold market reigns supreme

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Gold bar, in no shortage at Comex
WisdomTree

Gold prices are trading at a 6-year high (as at 7 August 2019) as the US-China trade tensions intensify. The troika formed by the interplay amongst Trump, China and the US Federal Reserve (Fed) is resulting in a negative feedback loop that is likely to keep gold prices elevated over the course of 2019. 

Figure 1: Gold price trading 12.3% above its 200-day moving average (dma)

Gold price
Source: Bloomberg, WisdomTree. Please note the chart illustrates daily data in USD/ troy ounces from 5 August 2018 to 5 August 2019. RHS: Right hand side

US-China-Fed trapped in a negative feedback loop

Trump’s announcement to raise tariffs on the remaining US$ 300Bn worth of Chinese goods to 10% from September 1, 2019 has rattled financial markets paving the way for a significant market sell-off. The announcement coincidentally was made a day after the Federal Open Market Committee (FOMC) meeting on 30-31 July 2019. As expected, the Fed lowered interest rates by 25 basis points (bps) and ended its Quantitative Tightening program. The real surprise emerged at the post-meeting press conference where Fed chairman Jay Powell appeared hawkish as he alluded to the interest rate cut as merely a “mid-cycle adjustment to policy” and “not the beginning of a long series of cuts” thereby dampening the prospect of further rate cuts. Powell also cited trade uncertainties as one of the three pillars which led to the decision of the quarter point rate cut.  Trump’s tariff hike announcement on Chinese goods is most likely a tactic being used by him to push the Fed to lower interest rates further in order to soften the blow to US economic growth while he raises the ante against China. At the same time, China is determined to be the world’s leading economic power and will not let Trump stand in its way. In response to Trump’s tariff announcement, the Chinese government has instructed state owned companies to suspend imports of US agricultural products and has devalued the Chinese Yuan. China is also strategically aware of Trump’s overarching goal to win the 2020 US presidential elections and is likely to embark on a tougher trade stance in order to lower Trump’s chances of winning the next US election. The reality is, US economic growth appears steady so far. The latest jobs report confirms that US consumers remain in a solid shape but the growth in job creation is slowing, wage growth remains subdued and core private consumption deflator inflation is running at 1.6% year-on-year (yoy) which justified the last US rate cut. We believe, the Fed’s hand will only be forced to act again if the deterioration of global trade starts to impact the US economy. This appears seemingly likely owing to the hard stance being adopted on trade policy by both the US and Chinese government. 

Gold continues to reap the benefits

Rising economic uncertainty on global trade is reviving gold’s safe haven status and remains at the forefront of investors’ minds. This is evident from the net speculative futures positioning data on gold futures which are now at 292,847 contracts, more than 1-standard deviation above its five-year average, according to data from the Commodity Futures Trading Commission (CFTC). 

Figure 2: Net speculative positioning more than 1-standard deviation above the 5-year average

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Gold net positions
Source: Commodity Futures Trading Commission (CFTC), WisdomTree as of 30 July 2019. RHS: Right hand side.

In addition, net central bank purchases in the H1 2019 totalled 374.1tonnes, 57% higher over the prior year and the highest level since they became net purchasers in 2010 according to the World Gold Council (WGC). This record purchases by global central banks underscores the need to diversify their reserves away from the US dollar. Central bank buying of gold tends to be the stickier money and cannot be underestimated. Gold is also inversely related to the US dollar and we expect further US dollar weakness to unfold owing to the added pressure from Trump on the Fed, the dollar’s reduced yield advantage versus non-US dollar alternatives and the expansion of national debt which will outpace with US economic growth.

Non-yielding assets such as gold appear more attractive compared to other haven assets such as bonds that are yielding low to negative yields. Currently nearly US$12 trillion of global sovereign debt is negative yielding according to Bloomberg. Capital is clearly in search of better opportunities and this is likely to continue to favour gold in the long run. Gold has disappointed since 2012, as global monetary easing has helped bid up riskier financial assets. However, we believe there are limits to how much monetary easing by global central banks can achieve and as market participants soon come to terms with that reality, gold’s price trajectory is likely to take the next leg higher.

By: Aneeka Gupta, Associate Director of Research


This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.

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Vetepriset kommer att gå upp – hur man än vrider och vänder på det

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Vete i närbild

Priset på vete har halverats på två, samtidigt sjunker vetelagren. Torbjörn Iwarson på Centaur Commodity Fund säger i DiTV att priset måste upp för att motivera bönder att odla mer. Han konstaterar att hur man än vrider och vänder på det så måste priset gå upp för världen kan inte vara utan vete.

Torbjörn Iwarson kommenterar vete och apelsinjuice.
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Bra start för Centaur Commodity Fund

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Tre olika råvaror

Centaur Commodity Fund är den nya råvarufonden i Sverige som förvaltas av den erfarna råvaruprofilen Torbjörn Iwarson. Fonden har en bred exponering mot råvarumarknaden och mäter sig mot det etablerade indexet Bloomberg Commodity Ex Energy Total Return Index.

Fonden har fått en bra start och presterade bäst jämfört med sina närmaste konkurrenter. Förvaltaren skriver på LinkedIn med glimten i ögat ”Nybörjartur med råvarufonden.” En fond ska självklart utvärderas över längre tid, inte en enskild månad, men det måste ändå vara trevligt att börja med att vara bäst.

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Vinregionen Champagne drabbad av hagelstorm

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Hagelskadad vinodling i Champagne

Den 12 maj bröt våldsamma hagelstormar ut i vid Champagnes vingårdar i Frankrike. Särskilt drabbat är området Vitry-le François där odlare har fått mellan 50-100 procent av sina odlingar förstörda.

Vingårdarna i södra Aisne hade 70-100 mm regn och stora översvämningar.  Svåra hagelskador drabbade regionerna Courcelles, Barzy-sur-Marne, Passy-sur-Marne och Trélou-sur-Marne som hade hagelstormar som varade i hela 45 minuter.

– Det är väldigt ovanligt att en enda storm drabbar ett sådant stort område. Detta är givetvis en stor katastrof för odlarnas ekonomi, deras familjer och anställda.  För odlare som säljer sin skörd är detta ofta den enda inkomstkällan. Medan odlare och producenter som skapar sin egen champagne oftast kan fylla ut med reserv-vin som man sparar tillbaka från bättre skördeår, säger Fredrik Schelin, vinexpert i Sverige.

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– Vi har inget hagel just nu men vi har det besvärligt med vädret just nu. Massor av regn, och möglet har redan satt sina spår. Det är svårt för oss att arbeta med jorden, men förhoppningsvis blir det bättre till sommaren, säger Jean-Paul Hébrart, Champagne Marc Hébrart – Mareuil sur AŸ.

Det är svårt att bedöma de övergripande skadorna av stormen. Mellan 450-500 hektar vinstockar, det vill säga ca 1,4 procent av hela Champagnes vinodlingar har drabbats i varierande grad, från 50 till 100%. Fram till skörden är Champagne-regionen fortsatt utsatt för risk för hagel och storm.

Isabelle Diebolt från Champagne Diebolt-Vallois – Cramant rapporterar:
– Vi har inget hagel, men oändligt mycket regn, så det är svårt att odla och jobba med vin just nu.

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