Gold dip looks like a buy as central banks step in, Barclays tells investors
Tankers are cruising through the Strait of Hormuz. It’s not wide open, but the fear of the Strait being shut down has passed. After peaking over the weekend at $98.75, WTI crude has been falling all morning, down to $92.65 in the first hour of trading and continuing to fall. It seems that Iran needs the oil revenue, and the threat to close the Strait was hollow. In the meantime, the US has decimated their military capabilities. The Iran situation has become much less threatening.
This morning, we’re seeing a relief rally across all industry sectors. Even energy is in the green. Tech is leading once again. Semiconductors are up 2.2% with NVIDIA (NVDA), +2.2% this morning, holding a major conference this week, and Micron (MU), +5%, reporting earnings this Wednesday. Financial services are up 1.4%, Industrials + 1.3%. That said, the only sectors in the green for the trailing month remain Energy (+6.2%) and Utilities (+1%).
The bond market is rallying as well. The US 2-year Treasury yield is down 5 bps to 3.68%, the 10-year is down 6 bps to 4.22%. Global yields are following the US lower, with the pointed exception of Japan, where yields continue to climb, though still below the spike they saw this January. Japan remains especially vulnerable to high energy prices with no domestic petroleum production. The US dollar index has pulled back modestly to 99.6 on the lower interest rates.
In other commodities, gold and silver are softer as they are less attractive as a risk hedge, while copper is higher, recovering from recession fears. Natural gas and gasoline are lower, though, while natural gas is now flat for the trailing month, gasoline remains +57%.
One winner throughout the Iran ordeal has been Bitcoin, which is up 2% today, +6.1% for the trailing week, +7.7% for the trailing month (albeit -15% YTD). It hit a high of $74.2K this morning, holding on to $73.2K as the market cooled after the first hour of trading.
The trend is clearly positive today, but crude oil in the $90s remains problematic, and a sustained recovery will require a reasonable timeline for bringing that back down to pre-Iran conflict levels. It appears that the worst of the situation may have passed.
