Markets and precious metals - what you need to know?
Markets remained somewhat negative yesterday amid the problems of the hedge fund Archegos Capital Management and subsequent drawdowns in shares of Baidu (NASDAQ: BIDU), Discovery (NASDAQ: DISCA), GSX Techedu (NYSE: GSX) and shares of banks Credit Suisse (SIX: CSGN). Nomura (T: 8604), Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) as hedge fund brokers.
This particular story most likely affected a limited number of investment banks and did not affect the entire financial system. And the markets are no longer paying attention to the fund's problems, maintaining restrained neutrality.
· American indices have remained more or less stable since yesterday.
· The UST-10 yield hit 1.776% yesterday, but has since declined and hovered above 1.73% in the morning. It is about the rise in inflationary expectations of investors.
· Precious metals continue to fall. For example, by 8 a.m. the price of gold has almost reached monthly lows.
The weakness of the precious metals market is certainly a concern for many. Why are prices dropping again?
It would seem that it is time to turn around (the border of 1700 has been broken through for gold, now it is the level of 1680), but, nevertheless, prices are steadily declining. Is inflation over? Has gold ceased to be an anti-inflationary instrument?
The main reason for all that is happening is the strengthening of the dollar around the world, which provokes a fall in prices. The situation is aggravated by the growth of yields on American treasuries, which are in many ways an alternative to gold.
What's the catch? The modern investment world is a struggle of alternatives. So far, gold is losing in this fight. I believe that the trend for both the strengthening of the dollar and the weakness of precious metals will be short-lived. After all, where should the big money go?
Into the crypt? I doubt it, although now the crypt is drawing on what the precious metals market has always gotten.
American treasuries? Their yield is still around 1.7%, which is not enough to provide a normal alternative (although this is already something compared to 0.5% earlier).
Stock market? Yes, no doubt, that's why it grows. Big money goes there.
The property? Yes. And it grows wildly. People today prefer to keep money in square meters rather than in gold. I believe that real estate today in many countries is so strongly overvalued that investment in it may slow down somewhat.
And the "fashion" for precious metals is likely to return quickly enough.
By the way, gold is declining, while platinum and palladium are stagnant. And at every opportunity, they try to rebound as quickly as possible.
As I already wrote, precious metals are getting cheaper primarily due to the rising dollar. And the strengthening of the dollar, in my opinion, is not the long-term trend. The dollar is growing because the US economy is emerging from the crisis more vigorously than, for example, the lagging economy of the eurozone. Once the incidence will stabilize around the world, and the trend will change. Moreover, a strong dollar is not beneficial to the United States, and they will do everything to prevent it from strengthening, as this slows down economic growth. I believe that soon enough the swing will go the other way. And after them the cost of precious metals.
My opinion: current drawdowns are a tribute to fashion, and this is not for long. I am calmly holding platinum futures, I am not going to sell shares of gold mining companies. Moreover, in the near future I will increase their volumes.