Marex Spectron Bullion Thoughts

A disappointing start to the year for both gold and silver, with the prices rallying in December in preparation for the usual January rise that unfortunately never unfolded. As such the markets grew tired and have pulled back from the highs as stale longs have liquidated. This, despite continued ETF buying and dovish comments from various Fed speakers, doesn’t bode well for precious metals. However as for most of last year, we remain in thrall to the mighty greenback and as it dropped during December, gold rose and vice versa over the last week. Keep trading this relationship and you won’t go far wrong with gold. Trade momentum and breaks and you will end up in a world of hurt.

On the subject of the dollar, as I mentioned earlier the prospect of further rate rises this year has receded somewhat and there is a general feeling that we may have done enough for the time being on that front. However, a lot will depend on economic data, which is short on the ground due to the Government shutdown and also on external factors such as the on-going US/China spat and the world economy as a whole which is showing signs of a marked slow-down. This puts the US even more into the driving seat as the country with one of the only well performing economies and this should keep the dollar supported despite a more neutral Fed.

Europe looks weaker and more fragmented by the day which will keep pressure on the Euro and as for the UK, how long have you got?! Suffice it to say, sell sterling on any rally. It really doesn’t matter what the outcome of Brexit is, this country is heading for a Government meltdown and with a socialist opposition in the wings, the economy will head that way too.