Gold and Silver: Outlooks look constructive – BAML

Dhwani Mehta FXStreet

Analysts at Bank of American Merrill Lynch (BAML) noted a few factors that call for an upbeat outlook for gold and silver in the coming quarters.

Key quotes

“Uncertainty over how the interplay between nominal rates, breakeven inflation and real rates will play out has been the root cause of gold's volatility during 4Q20.”

“Confidence that global economies will reopen in 2021 as vaccines are deployed meant that financial markets have increasingly priced in a cyclical recovery, reflected for instance in a steeper US yield curve.”

“Importantly, rates re-priced not through an increase in breakeven inflation, but rather higher nominal and, importantly for gold, real rates, effectively putting a stop to the bull market. “

“We are following dynamics in the US closely, hoping for more fiscal support as the government

1) rolls over Covid-19 relief measures

and 2) gets to work on an infrastructure stimulus.”

“At the same time, the Fed should strengthen guidance that nominal rates will remain capped as the economy reflates, thereby reducing the drag from real rates. “

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

GBP/USD holds range below mid-1.3600s amid Fed risks and Iran tensions

The GBP/USD pair extends its sideways consolidative price move for the second straight day, and trades around the 1.3630 area during the Asian session. The US Dollar is looking to build on its modest recovery from the lowest level since May 14, and is acting as a headwind for the currency pair. The lack of follow-through selling warrants some caution for bearish traders.

EUR/USD gains support amid hawkish ECB expectations, subdued US Dollar

EUR/USD inches higher after posting minor losses in the previous day, trading around 1.1670 during the Asian hours. The pair finds support as rising oil prices, elevated bond yields, and escalating Middle East tensions drive Eurozone inflation concerns. These factors have boosted expectations for a more hawkish stance from the European Central Bank, which is widely anticipated to deliver a 25-basis-point rate hike in September.

$4700 tested as Gold pulls back but bullish potential remains intact

Gold has pulled back sharply from fresh 15-week highs of $4,697, snapping a two-day uptrend in Asia on Tuesday. The US Dollar (USD) holds onto recovery gains, capping further upside in the bullion.

Bitcoin tops $80,000 as US Treasury fights high yields – AERO, VIRTUAL rally

Bitcoin extends gains above $80,000 as broader market risk-on sentiment persists. The scarce asset could extend its rally as the US Treasury combats high yields in the long-dated bond market, with further interventions on the horizon. Aerodrome Finance (AERO) and Virtuals Protocol (VIRTUAL) emerged as top performers over the last 24 hours.

The forex market is switching to a ‘debasement trade’

The US dollar has stabilised near three-month lows thanks to a rapid recovery in Treasury bond yields. Yields on 30-year bonds are returning to the levels seen following the Treasury’s announcement that it was increasing the minimum purchase volume to $4 billion. The greenback got support from falling stock indices, the continued rally in Brent crude, and positive signals from the US economy.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.