Markets: what gold, the dollar and oil tell us

Markets: what gold, the dollar and oil tell us

For investors with strong nerves, the last session of the week took place in Ripeespecially for those who are involved in the purchase of choice.

The main Wall indices despite the positive opening lost their gains after the University of Michigan released data on consumer confidence.

In particular, the consumer confidence index fell to 57.7 points in May from 63.5 points the previous month. This is the lowest reading since last November.

Additionally, the current economic conditions index came in at 64.5 points from 68.2 points in April, while the consumer expectations index slipped to 53.4 points from 60.5% points.

The only “digestible” measure was consumer estimates of the path of inflation next year, which is expected to decline slightly to 4.5% from 4.6% the previous month. In the longer term, consumers expect prices to show an annual increase of 3.2%.

THE Ripe yesterday, however, she didn’t just have to “digest” consumer confidence measures.

At the beginning of the afternoon, it was broadcast in the media the last Bank of America noteaccording to which A prolonged period of economic slowdown in the United States is likely, which will eventually put pressure on technology stockswhich in recent weeks have won the preference of investors.

As its analysts usually wrote BofA A recession should hit credit and technology, as it did in 2008.

Its analysts also share this view. Bloomberg Intelligencewho see higher interest rates and limited prospects for profitability as likely to lead to a “deflation To technology, media and telecom stocks.

His rating BfromA but it contained another explosive assessment: the US Federal Reserve is unlikely to stop raising interest rates in an environment of high inflation and low unemployment.

He dropped the same “bomb”. Fed Chair Michelle Bowmanthrough yesterday’s statements that The Federal Reserve is not excluded need raise interest rates further and keep them high for a while.

Bowman, of course, stated the obvious: that if inflation remains high and the labor market remains tight, further tightening will indeed be needed. And of course, a rate cut will require serious evidence that inflation is on a downward trajectory and not the marginal de-escalations we are seeing so far.

Regardless, he stressed that he expects the key interest rate to remain restrictive enough for some time to reduce inflation and create the conditions necessary to support a strong labor market.

In the article two days ago US inflation: what the market didn’t like we had presented the estimates for the next meeting of the American Central Bank on June 13 and 14, but also for the last meeting of the year. We also noted that it will be particularly interesting to see how expectations evolve in the weeks and months to come.

Already, two days later, the estimate of a further 25 basis point hike at its next meeting fed increased from 1.5% to 9.5%.

The rise in this expectation is not the best for the tech index Nasdaqwhich increased by 22% in 2023 precisely because of the prospect that the fed not only will it halt interest rate hikes, but it will soon begin cutting rates, a development that would provide relief to the rate-sensitive tech industry.

According to his data EPFR Global, inflows into tech stocks in the week to May 10 were around $3.8 billion. Thanks to these inflows, the outflows from the financial sector, which amounted to 2.1 billion dollars, were not particularly noticeable in the technical chart of the indices.

But what if the tech sector starts to “empty”? Clearly, the technical picture of US indices will change dramatically.

If we add the strong possibility that we will be led to a further increase in structural inflation if fears about the El Niño effect are confirmed – you can read more here but also the possibility of further turmoil in the banking sector if commercial real estate continues to worry investors – you can read more here it is understood that for the next period, the international markets will be filled with several mines.

Therefore, as investors, we must ensure sufficient liquidity in time and orient the portfolio towards quality and defense.

OOil and Gold “Declarations” – The “Intervention” of the Dollar

For weeks, gold and oil have been pointing the finger at the “empty shirt” of the expectation of a drop in short-term rates.

Since the beginning of the year, the price of gold has strengthened by 10.2%, approaching on May 4 the highs of August 2020 at 2075 dollars/ounce and March 2022 at 2070 dollars/ounce.

It was then pushed to those levels due to the pandemic and escalating geopolitical tensions. Today it is approaching that peak because investors are looking for shelter in an environment of uncertainty caused by mixed macroeconomic data, fears of a global recession and the inability of central banks to control inflation more effectively.

Any deterioration of the above factors is believed to bring new flows to the precious metal. (ps: many gold and silver mining stocks also had a big rally in 2023. For example, the barrick Gold increased by 7.5%, Wheaton Precious Metals an increase of 27%, i.e. the Franco Nevada up 13%).

Oil under the same fear that a sharp rise in interest rates could lead us to much more than a mild global slowdown, to a severe recession, has corrected 13.9% since the start of the year .

If he hadn’t intervened THEPEC+ with its decision on further potential supply cuts to contain prices, possibly the Brent even be below 70 dollars/barrel.

The fact that the scenario is plausible not only does not reduce the fed interest rates, but on the contrary to carry out further increases if necessary, this can also be seen in the rise of the dollar over the past two days.

At the first hint that he may not have finished the fed current tightening cycle, the dollar index immediately gained almost two points, while the pair USD/USD marked a sharp decline sinceoh 1.1092 to 1.0850, closing below the 50-day moving average -1.0872- and approaching the 90-month support around 1.0820.

The weakening of oil and the rise of gold and the dollar reveal in all their splendor the “muted” fears of investors about the transformation of the slowing of the world economy into a recession, the increase of the pressures of the banking sector, the possible need for a further rise in interest rates in line with inflation and finally the confrontation in the United States over the debt ceiling.


This material is provided for informational purposes only. Under no circumstances should it be considered an offer, advice or solicitation to buy or sell the products mentioned. Although the information contained is based on sources believed to be reliable, no assurance is given as to its completeness or accuracy and should not be relied upon as such.

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