Daily summary: Gold turns higher despite the spectre of rising yields

9:03 pm 19 January 2022

  • European stocks finished mostly higher
  • Wall Street rebounds on earnings
  • Precious metals surge 

Most of the major indices from the Old Continent finished today’s session higher as solid earnings results from Burberry, Richemont and ASML overshadowed concerns regarding rising bond yields. Germany’s 10-year Bund yield turned positive for the first time since 2019, as the country's inflation rate remained at a 29-year high. Meanwhile, CPI data from the UK showed the consumer price inflation jumped 5.4% last month, a level not seen since March 1992. Markets have priced in a 10 basis-point rate hike from the ECB in September and some analysts expect a second rate hike by December.

Major Wall Street indices rose sharply in early trade, however bullish momentum faded away later in the session. Investors digest fresh earnings reports from Bank of America, Morgan Stanley, Procter & Gamble and a small decline in Treasury yields. Yesterday, US 10-year bonds yields reached almost 1.9%, the highest since July 2019, while today pulled back to 1.85%. Rising yields may reflect in some way expectations regarding the long-term interest rate hikes. From this perspective, given the current inflation frenzy, yields seem to be still low anyway. Even with the announced strong interest rate hikes this year in the US, real interest rates are likely to remain “strongly” negative. The market is in some way afraid of hikes and the fact that the Fed may no longer look favorably on Wall Street, as it was after 2018, when the monetary tightening ended very quickly which negatively affected stock market. During today's session Nasdaq 100 at some point fell 10% retraction from its all-time high, which point out the index entered in to "technical" correction. Of course, the bear market is still a long way off, but it seems that the bulls do not know how to stabilize the market. This is due to the fact that the quarterly results of Wall Street companies are not impressive. Of course, they are not bad, we do not see negative results, but they are largely below market expectations. If the current earnings season turns out to be weak, given rising inflation, higher interest rates and further supply problems, US companies will not be able to sustain the strong earnings and revenue growth seen in recent years.

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Upbeat moods prevail today in most commodity markets. Precious metals prices rose amid a weaker dollar. Gold price broke above major resistance at $1830.00 and is testing $1,840.00, which is the highest level observed this year, while silver jumped over 3% above $ 24.00. WTI oil rose above $86.60 which is the highest level since October 2014, while Brent tested $89.00 level, however bulls failed to hold onto those gains later in the session.

 Major cryptocurrencies moved lower today after that vice-president of the European Securities and Markets Authority, called for a change in the current methods of bitcoin mining as it consumes huge amounts of energy. In an interview with the Financial Times, ESMA's current vice chairman, Mr. Erik Thedéen, said that the current form of cryptocurrency mining creates a risk of not meeting the goals of the Paris Agreement, which aims to achieve climate neutrality for the European Union by 2050. Bitcoin price fell to $41 000 level while Ethereum tested $3040 level. However, the bulls manage to recover some of the losses following the news that Google is considering allowing its clients to keep cryptocurrencies on virtual cards. Google informs that PayPal will be specially hired for this job and will be responsible for the payment sections.

Silver price followed in gold footsteps and rose more than 3% on Wednesday. Buyers managed to break above another major resistance zone around $23.60, which is marked by previous price reactions, 200 SMA (red line) and 23.6% Fibonacci retracement of the last downward correction. If current sentiment prevails, upward move may accelerate towards next resistance at $24.75. Source: xStation5

The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.

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