The U.S. dollar fell on the downside surprise in U.S. November consumer confidence data at 96.1 vs. 98 (expectations). This is consistent with the downside surprise in the University of Michigan survey earlier this month and the downside miss in retail sales,
Risk appetite is flourishing post-Astra Zeneca’s vaccine news, which offers a game-changing panacea for global mobility while getting a further lift from the initiation of U.S. President-elect Joe Biden’s formal transition.
Janet Yellen and US Fed Chair Jerome Powell are the new normal economic power brokers. T
hey will aim to get the real economy to full employment. Both have learned from past mistakes. Exceptionally easy financial conditions will prevail for much longer than usual. Markets will be encouraged and incentivized to take more and more risk. Eventually, there will be a price to pay – but worry about that another day.
Malaysian Ringgit has an ace up its sleeves
As an economy dependent on a large oil export quotient, the Ringgit has an ace up its sleeve this week as oil prices are soaring ahead of the OPEC+ meeting as the bullish trifecta early vaccine rollouts, OPEC quota extension, and a weaker US dollar should see the Ringgit trade favourably.
However, the pair could mark time ahead of the key domestic CPI release today.
As energy ETF flourishes, gold ETF investors are running for the exits supporting the notion there are much better trades for the reflationary bounce than gold.
The improved expectation for material vaccine deployment in 2021 has likely closed the door on the gold upside. And given the heft of ETF positions, especially the massive accumulation since the beginning of this year, there is definite scope for a deluge of ETF unwinds. So, look for a massive clear out again on a break of the psychological $1800.
Gold fell and hit its lowest level since July. It is much of the same – transfer of ownership continues into stable allocation – with no huge clips dealing with Asian banks providing the offer during Shanghai Gold Exchange hours.
Gold rout continues as investors embrace vaccine news. The break of USD1,800/oz support may take prices near USD1,750/oz as surging investor optimism due to promising COVID-19 vaccines has undermined gold and silver.
For much of the year, increased risk-off sentiment sent capital into U.S. Treasuries, which pumped up the USD and weakened gold. Conversely, increases in risk-on appetite sent money into stocks and less so to Treasuries, which often undermined the USD and tended to boost gold.
These trade winds could be shifting. Equities have charged higher recently, and gold and silver have plummeted. A weaker US dollar has been of no help to gold.
It is quite likely that a more traditional inverse gold/equities relationship is being re-established once again. A risk-on mood cannot be counted on to boost gold, simply because it may weaken the USD, at least not in the context of a vaccine rally.
Gold will continue to be undermined by the commanding macro theme related to a vaccine recovery and the reduced risks associated with central bank debt monetization or the pursuit of quasi-modern monetary theory.
FX and Gold analysis and insights from Stephen Innes, Chief Global Market Strategist at Axi