Gold’s message dismissed by equity bulls- of course they’re not in!!!
By Jamie Chisholm, Global Markets Commentator
Published: April 4 2011 05:40 | Last updated: April 6 2011 13:57
Wednesday 12.35 BST. Pretty much every major asset class is going up as traders seem to be having a final splurge before the age of ultra-loose monetary policy comes to an end.
Underlying optimism about the global economy is emboldening bulls, while signals flashing inflation warnings are being dismissed.
The FTSE All-World equity index is up 0.4 per cent to a fresh cyclical high, after Asian exchanges – Japan aside – shrugged off China’s out-of-hours monetary tightening.
US stock futures are up 0.7 per cent, and the FTSE Eurofirst 300 is higher by 0.5 per cent, helped by stronger than expected German factory orders in February.
Gold is up 0.6 per cent to $1,458 an ounce having hit a record of $1,461, while silver is at a fresh 31-year high of $39.62.
The sharp rise of late for bullion is supposedly being predicated on fears of building inflation pressures – US 5-year breakeven rates, a gauge of inflation expectations, are above 2.4 per cent, the highest since July 2008. And it is true that many commodities are challenging record levels.
Brent crude on Tuesday breached $122 a barrel for the first time since August 2008 as the conflict in Libya combined with worries about production out of Nigeria and Gabon to increase concerns about supply disruption at a time of increasing demand.
Factors To WatchWith oil at 30-month highs, US energy inventory data published at 15.30 will be eagerly scanned by traders.
And corn hit a record of $7.7075 a bushel on Tuesday, up 15 per cent in four days, adding to fears that higher food prices could exacerbate civil unrest in poorer countries. US-traded corn is currently down 0.7 per cent at $7.6150.
However, core bond yields are little changed on the session, suggesting the market is being somewhat selective in its immediate rationale for pushing various asset prices higher.
Indeed, it is possibly a misjudgement to assume that bullion’s rise reflects inflation concerns. Other factors cited by analysts and commentators over recent days for the strength in precious metals have included: worries over the eurozone; geopolitical problems; Japan’s nuclear woes; and even the possible US government shutdown.
But none of these issues seem to be having any lasting impact on other risky assets, so it would be strange if their influence was being applied to bullion alone.
Meanwhile, any traders who shorted industrial metals after Tuesday’s China rate rise will be smarting. A weaker dollar on Wednesday and hopes that Beijing may be coming to end of its tightening cycle has pushed the complex higher, with copper up 1.6 per cent to $4.33 a pound. Speculators remain wedded to the “reflation trade” even as commercial heavyweights warn that demand is slowing.
read the rest here: FT.com / FT’s rolling global market overview – Gold’s message dismissed by equity bulls