AM Analysis – “Money managers continue their bearish tone” – David White
Gold resumes being sold this morning as news broke over the weekend that money managers continue their bearish tone. Net holdings in futures and options in the precious metal fell 20 per cent to under 45,000 contracts, and short bets increased the most since early August. And while notable investors like George Soros dumped gold earlier in the year, Paulson continues to fight the market in what looks like an attempt to once again be the clever contrarian.
Elsewhere, equities are set to start the week positively. We’re calling the FTSE 100 25 points higher. Based on futures, the DJIA is trading at around 16,103, yet again another high for the year.
PM Analysis – “Nuclear deal struck leads FTSE higher” – Max Cohen
A nuclear deal struck at the weekend between Iran and six world powers has had an encouraging knock-on effect with the FTSE 100 being led higher by IAG, EasyJet & Carnival on expectations of lower fuel costs. Sanctions imposed against Iran in the past two years have slashed exports from the OPEC member by more than half, helping keep Brent above $100 a barrel despite weak global demand.
Additionally, U.S futures are trading higher giving no relief to the bulls hoping to see some weakness. Whilst valuations in the S&P 500 climbed 20 percent in 2013, the price-earnings ratio, at about 19, is significantly less than when stocks plunged in 2000 at 30. Add that to the fact that the Christmas period traditionally shows considerable strength, the likelihood of a “correction” seems more and more unlikely.
The high level of suspicion and doubt in this bull market is in itself further fuelling the rally. Clearly not everybody is involved suggesting that the level of exuberance can continue to grow. We are seeing evidence of this as people continue to buy into any dips.
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