Global re inflation trade returns: will silver and copper catch up with gold?

category:Finance
 Global re inflation trade returns: will silver and copper catch up with gold?


Institutions are still bullish on the logic behind next years gold price

The weakening trend of the US dollar is one of the key factors to benefit the gold price, but the core is still the trend of the real interest rate (10-year US bond yield inflation expectation), because this data has been significantly inversely proportional to the gold price in the past two years. When real interest rates fall, it is more logical for investors to allocate gold.

Since the third quarter, the real interest rate of the United States showed a trend of bottoming up, climbing from the previous lowest of - 1.04% to - 0.89% on December 1. The recent 10-year US bond yield is also about to exceed 1%. In addition, the absence of a new round of fiscal stimulus earlier hit the inflation expectations of the market, so gold fell here.

But in the eyes of some institutions, the situation next year is not so pessimistic. Robert stclair, global investment strategist at Fullerton capital management, told ifnance that the Feds yield curve will be steep next year, but the Fed has well anchored the short-end yield curve for 1-3 years, and the short-end part is more critical to the financing cost of enterprises. Next year, as the economy recovers, the long-term yield curve is expected to start to steep. However, inflation expectations should rise faster than nominal yields, which will keep real yields stable and will not rise significantly.

At the same time, the implementation of a new round of fiscal stimulus is also crucial to gold prices. Clare believes that Yellens appointment has played a key role in promoting. This year, she proposed to congress at a crucial moment the need for more fiscal stimulus, which is crucial for economic recovery. But at the same time, she is also a conservative economist, and as a member of the responsible federal budget committee, she supports responsible and sustainable fiscal policy settings. The committee spent a lot of time warning about the dangers of high public debt. But on the whole, she is a more balanced role, supporting fiscal stimulus to support the economy, and being cautious about the direction of spending. Moreover, her nomination is conducive to reaching a consensus between the two parties, and in the context of a divided Congress, the Treasury secretary with that background is very important.

Earlier, the market expected a fiscal stimulus of nearly $2 trillion to $3 trillion, but now it is likely to shrink to only $1 trillion. But in Claires view, the economic data in the third quarter rebounded substantially, and the retail data also improved. In this case, although the stimulus plan may be smaller than the markets expectation, the market will remain positive next year as the economy recovers. At the same time, the Biden team emphasizes targeted fiscal stimulus, which is still good for the market. Therefore, this will still be conducive to the rise of inflation expectations in 2021, so that the real interest rate will remain stable, which will also benefit the gold price.

Standard Chartered said gold had retreated nearly $300 an ounce from its high of $2075 an ounce on August 7, and gold now looks cheap relative to the real yields on five-year and 10-year US Treasury bonds, which were - 1.32% and - 0.93% respectively. At the same time, central banks continue to actively expand their statements. It is expected that the real yield of the United States will continue to maintain a deep negative value, providing continuous support for gold. As a result, gold is expected to recover to $2100 / oz by the second quarter of 2021.

Silver, copper or better

During the interview, the reporter found that some institutions generally believed that the silver price might usher in a big market, and the gold silver ratio was expected to recover significantly. The future market paid close attention to the change of silver inventory and Comex silver position. Citigroups silver supply and demand model shows that there will be a shortage of 150 million ounces of silver in 2021.

Commodities such as precious metals and crude oil were hit hard in September, with silver falling 17.4%, the worst performing commodity. But even after the September crash, silver remained one of the best performing asset classes of the year, with a cumulative increase of 27.69% in the third quarter.

After the silver high level callback, the international investment bank high profile sings many. In mid October, Citigroups report predicted that the price of silver could rise to $40 / oz, or 70%, in the coming year. In the same period. The Goldman Sachs report predicts silver prices are expected to reach $30 an ounce. At that time, the lowest spot silver price dropped to around $24 / oz. The reason why the institutions sing more silver lies in the judgment of the gold silver ratio, because every time the commodity bull market comes, the gold silver ratio will fall below 50, and now the gold silver ratio is still as high as 75. In March this year, the gold silver ratio was still as high as 120.

In addition to silver, copper is also a high concern of the organization. Standard Chartereds chief global strategist Robertson told reporters that the commodity market would benefit from low interest rates, global fiscal stimulus and a return of capital. Copper has rebounded 70% from its march low, but in 2009 it rose 130% from its low in a similar nine months. In contrast, the current rally is still behind the overall gain of about 250% in 2009-2010. Although history does not necessarily repeat itself, it can be used as a reference. At the same time, Robertson also noted that the rebound in the copper / gold ratio lagged behind the direct performance of copper prices, but the ratio has rebounded more aggressively in the past three months (i.e., copper has risen more than gold), suggesting that the commodity complex may shift from safe haven assets to cyclical assets. Copper will continue to outperform gold, given growing optimism about the cyclical recovery, vaccine prospects and the shift to high-risk assets. However, this does not mean a negative attitude towards gold. After the global financial crisis, when both commodities recorded triple-digit gains, the copper / gold ratio nearly doubled. Source of this article: Guo Chenqi, editor in charge of first finance and Economics_ NBJ9931

In addition to silver, copper is also a high concern of the organization. Standard Chartereds chief global strategist Robertson told reporters that the commodity market would benefit from low interest rates, global fiscal stimulus and a return of capital. Copper has rebounded 70% from its march low, but in 2009 it rose 130% from its low in a similar nine months. In contrast, the current rally is still behind the overall gain of about 250% in 2009-2010. Although history does not necessarily repeat itself, it can be used as a reference.

At the same time, Robertson also noted that the rebound in the copper / gold ratio lagged behind the direct performance of copper prices, but the ratio has rebounded more aggressively in the past three months (i.e., copper has risen more than gold), suggesting that the commodity complex may shift from safe haven assets to cyclical assets. Copper will continue to outperform gold, given growing optimism about the cyclical recovery, vaccine prospects and the shift to high-risk assets. However, this does not mean a negative attitude towards gold. After the global financial crisis, when both commodities recorded triple-digit gains, the copper / gold ratio nearly doubled.