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Asia Half Time: Looking At Gold, Oil And The NZ Dollar

Published 06/24/2020, 12:35 AM
Updated 07/09/2023, 06:31 AM
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Gold markets

There's a lot of macro focus on declining US real yields. Ten year real yields are trading at a 7-year low of -0.67%. I'm not an economist, so I'm not even going to wade in if those negative real rates reflect secular stagnation, or a global savings glut, but what I do know from history is that if low real yields are exceptional for gold, then negative real interest rates must be a godsend.

Concerns over a weaker US dollar and that a jump in coronavirus infections will lead to more stimulus measures. Against this backdrop, bullion should remain on a reasonably constructive path, paved with golden bars and should continue outperforming other safe-haven assets.

I think all markets, however, are struggling to recenter right now, as is gold, which has been seeing sporadic profit-taking today, which makes sense after yesterday lift-off in NY

Oil markets

The oil market is struggling under the weight of COVID-19 headlines and a surprising build in the API data, which has arguably caught a number of the bulls by surprise. Indeed, oil bulls are feeling like a beast of burden today, getting weighted down by the COVID headlines-deluge, while having to carry that surprising inventory load.

Currency markets

This week's trade of the week has worked to perfection, as the AUD/NZD surges higher, as the RBNZ waxes dovish after the Monetary Policy Committee agreed to continue with the Large Scale Asset Purchase (LSAP) program to keep interest rates low for the foreseeable future. So is the next step negative rate territory if the economy warrants??

Looking ahead to the August statement, the bank has left the door ajar to providing additional policy stimulus, implicitly suggesting that it's prepared to cut beyond the zero bound: and continues to prepare for the use of further monetary policy tools as needed. and well beyond just a tinge of dovishness, if I might say, as the Kiwi rolls over 

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