Category: Market News

Inflation Hedging in Strategic Asset Allocations: Gold or Something Else?

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Source: By Roberto Croce, Head of Risk Parity and Alternative Risk Premia, Newton Investment Management North America LLC.

INTRODUCTION

Inflation hedging is of particular interest to investors today, as recent consumer price inflation numbers show inflation rising faster and higher than at any time since the global financial crisis more than a decade ago. In this paper we answer the following questions:

Question 1. Does inflation only matter to investors with liabilities denominated in real dollars?

Answer 1. No. We find that the hedge/no hedge decision does not depend on whether investor liabilities are denominated in real or nominal US dollars. In this paper we will show that high inflation periods are almost as bad on a nominal basis as they are in real terms, particularly when the cash return is zero.

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Gold and Silver unlikely to outperform in the coming months – HSBC

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Source: 12/30/2022 2:04:35 PM GMT | By FXStreet Insights Team

Strategists at HSBC remain neutral on Gold and Silver as they see muted momentum.

Higher rates and real bond yields create a competitive disadvantage for Gold

“Despite the recent bounce in commodity prices, we do not expect Gold and Silver to outperform in the coming months.”

“USD’s recent strength has weighed on metals, while higher rates and real bond yields create a competitive disadvantage for Gold compared to cash and bonds.” 

See – Gold Price Forecast: XAU/USD to rebound slightly next year as Fed easing starts – ING

Outlook 2023: Will strong demand outlook lead to a rally in silver?

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Source: The Economic Times | Markets | By Pawan Nahar

Synopsis: Silver, other than being a precious metal, has more usage in the industrial sectors and thus, industrial demand also guides its movement. Furthermore, gold also holds influence over silver prices.

Silver witnessed a roller-coaster ride in 2022, thanks to increased volatility in the bullion market and industrial metals but managed to deliver around 15% returns to investors. The metal faced bouts of profit taking but geopolitical tensions kept its demand intact.

Silver, other than being a precious metal, has more usage in the industrial sectors and thus, industrial demand also guides its movement. Furthermore, gold also holds influence over silver prices.

Rahul Kalantri, VP-Commodities, Mehta Equities, said, “In the mid of 2022, we saw see a significant fall in silver prices because of the low industrial demand due to a global slowdown and a drastic jump in dollar index as well as bond yields.”

Silver has its own return characteristics and is an attractive commodity in the present market conditions.

NS Ramaswamy, Head of Commodities, Ventura Securities said, “The gold-silver ra ..

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Silver Price Analysis: XAG/USD renews eight-month high above $24.00

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Source: FXSTREET  By Anil Panchal

  • Silver price picks up bids to refresh multi-day high.
  • Overbought RSI can challenge XAG/USD bulls, $24.75 in focus.
  • Convergence of 21-DMA, bullish channel’s lower line highlights $22.70 as the key support.

Silver price (XAG/USD) portrays an uptick to refresh the eight-month high at $24.30 during Wednesday’s Asian session.

The bright metal rose the most since November 04 the previous day, which in turn propelled the RSI (14) towards the overbought territory. As a result, the quote’s further upside appears doubtful.

This suggests hardships for the XAG/USD bulls as they approach the upper line of the seven-week-old rising trend channel, close to $24.75 by the press time.

Even if the Silver buyers manage to cross the $24.75 hurdle, the 78.6% Fibonacci retracement level of the metal’s March-September downside, near $24.90, as well as the $25.00 round figure, will challenge the commodity’s further advances.

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PRECIOUS-Gold eases in narrow range as traders eye economic data

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Source: Written by Arundhati Sarkar for Reuters 

Dec 21 (Reuters) – Gold prices eased in a tight range on Wednesday as the U.S. dollar firmed, although bullion was not far from a one-week high scaled in the previous session as traders looked ahead to impending economic data later this week.

Spot gold XAU= fell 0.2% to $1,813.23 per ounce by 0957 GMT, after rising more than 1% on Tuesday on the back of a dip in the dollar. U.S. gold futures GCv1 eased 0.2% to $1,822.70.

“After yesterday’s sharp rally, traders are waiting for fresh cues, especially from tomorrow’s GDP data and the performance of U.S. dollar,” said Hareesh V., head of commodity research at Geojit Financial Services.

Reports of a surge in COVID-19 cases in China may be another trend setter for the market, he said, adding prices are most likely to be choppy, possibly between $1,760 and $1,840.

The dollar index .DXY was firm on the day after a yen driven fall in the last session following a Bank Of Japan surprise policy tweak.

On the data front, the U.S. gross domestic product (third estimate) due on Thursday and the core personal consumption expenditure (PCE) price index scheduled on Friday are also on the investors’ radars.

Gold prices have risen nearly $200 since falling to a more than two-year low in late September as expectations around slower rate hikes from the Fed dented dollar’s allure.

“As we head into 2023, the Federal Reserve is expected to pivot in its rate hiking drive and the dollar is likely to soften, benefiting gold due to the inverted price correlation between the two assets,” Ricardo Evangelista, senior analyst at ActivTrades said.

While gold is traditionally considered a hedge against inflation it tends to loose its shine in a higher interest rate environment.

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