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Commodities

Gold traders set their bets, U.S election in play

Gold futures traded at around $1,891/ounce as the weaker dollar helped move prices upward.

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Dollar, Gold soars above $1850, rises to 9-year high

Gold prices were fast approaching the 1,900/ounce, amid global investors and gold traders setting their bets out on the outcome of the U.S. election and other prevailing macros, like the rising COVID-19 caseloads disrupting financial markets.

What we know

At about 7.05 GMT, Gold futures traded at around $1,891/ounce as the weaker dollar helped move prices upward.

With an important political event coming to play, gold traders and global investors flock to gold, in taking advantage of the myriad uncertainties that can occur, on the basis that the race looks like a tough call by independent political strategists.

READ: U.S dollar up, Currency traders focus on U.S election

What this means

Should the result bring a blue party presidency, the bias is that gold bulls would have enough gas to reach at least $2,000/ounce, on the bias that a substantial COVID-19 stimulus program would weaken the dollar and boost the precious metal value.

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What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a detailed note to Nairametrics spoke on the political macros affecting the precious metal market.

Gold is down over the last two weeks, which is understandable, as the COVID-19 outbreak is getting progressively worse in Europe and most of the world, leading to renewed lockdowns.

“It seems this is now somewhat priced into European equities, and there does not seem to be much more room for risk reduction ahead of today’s US elections.

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“The potential unlocking of another US fiscal stimulus package would be most flattering for gold. With the blue wave impulse kicking in, gold remains in demand, supported by hopes for a stimulus deluge that could trigger the elusive inflationary surge.”

READ: N5billion bailout fund underway for the Aviation sector – Minister

What to expect

It’s key to note that the US election will capture the world’s attention now and most of all, it’s expected that there will be a significant amount of price swings coming to play in some hours’ time.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment Trading. Featured Financial Market Analysis for a Fortune Global 500 Company. Member of the Chartered Financial Analyst Society. Follow Olumide on Twitter @tokunboadesina or email [email protected]

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Commodities

Oil prices hit highest price level since Q1

Crude oil prices hit their highest price levels since March at the second trading session of the week.

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Crude oil prices rebound ease investors’ concerns for Nigeria debt market, How substantial is compliance for the Oil market?, Crude Oil price soars high on new COVID-19 vaccine

Crude oil prices hit their highest price levels since March at the second trading session of the week. The macros driving crude oil bulls to such gains include reports that COVID-19 vaccine candidate might likely tame the rising COVID caseloads, coupled with U.S. President-elect Joe Biden going ahead to begin his leadership transition.

  • At the time of writing this report,  Brent crude futures rose higher than 1% to trade at $46.56 a barrel while U.S. West Texas Intermediate crude soared higher than 1%, to $43.59 a barrel.
  • Brent crude futures on Tuesday struck its highest price level since early March after the fight between the two oil-producing juggernauts (Saudi Arabia and Russia), which sent oil prices melting like an ice cream exposed in the sun.
  • Both major oil benchmarks closed 2% up yesterday after gaining about 5% last week.

Stephen Innes, Chief Global Market Strategist at Axi in an explanatory note to Nairametrics dissected the macros hitting crude oil prices to soar higher;

“Oil benefited from the vaccine news, with WTI trading around $43 a barrel and Brent near $46 even when the US dollar rallied on positive US PMI numbers and taking a bit of steam out of the broader commodity markets.

“While the air looks a bit thin above WTI $43, still, the announcement over the weekend that US COVID-19 vaccinations could begin in early December has spurred another wave of optimism for oil and wider markets, bolstered yesterday by the AstraZeneca version of the vaccine.

“Oil markets are rightly jumping for joy as the AstraZeneca delivery is a big deal as most of the developed world will be able to immunize its most at-risk population to COVID by the spring and likely the entire community by mid-year.”

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What to expect: The curve has continued to shift, flattening considerably from 3Q21 into 1Q22, with the time spreads from Dec21 now in backwardation. The shortage is priced into WTI from the end of next year as a capital discipline remains the priority for oil firms.

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Commodities

Nigeria’s new Gold ETF and money market funds suffer huge outflow

For the second consecutive week, the New Gold ETF, which trades on the Nigerian market has suffered huge outflows.

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Gold surges, Joe biden

As the rally on the cryptocurrency market continues and interest on money market funds continues to fall, investors keep moving their assets around.

For the second consecutive week, the New Gold ETF, which trades on the Nigerian market has suffered huge outflows.

READ: Is Nigeria’s mutual fund industry a duopoly dominated by two fund managers?

During the second week ending November, 13th, the new Gold ETF suffered a total redemption of N5.22 billion bringing its month-to-date (MTD) redemptions for the month of November to N21.7 billion.

This is according to analysis conducted by Quantitative Financial Analytics on the NAV Summary reports released by the Security and Exchange Commission, for the month of November, 2020.

GTBank 728 x 90

READ: Pension fund administrators pile up cash in anticipation of withdrawals

Some money market funds have also been witnessing large outflows. Notable among them include FBN Money market fund, which has seen about N11 billion of redemptions, Stanbic IBTC money market fund has also recorded a redemption of N5.99 billion while ARM money market fund suffered a redemption of N3.487 billion, all within the month of November.

Source: Quantitative Financial Analytics

The redemptions from money market funds may not be unconnected with the near-zero interest rates being paid by the money market funds.

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Currently, the FBN Money market fund’s yield is 1.79%, Stanbic IBTC money market fund now yield’s 1.36%, while ARM money market is yielding 1.717%, all on an annual basis.

READ: Top 10 high-yield money market funds that beat inflation in Nigeria

Bond Funds Benefit: A closer analysis shows that those money market fund redemptions are finding their way into various bond and fixed income funds.

Since the beginning of the month of November, bond and fixed-income funds have welcomed some large contributions. Among them are UBN Bond fund which received about N8.7 billion, followed by Stanbic IBTC Bond fund’s N7.7 billion additional contribution.

Also, in that league are Stanbic IBTC Guarantee fund and Zenith Income fund that received estimated contributions of N2.28 billion and N2.147 billion respectively.

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Source: Quantitative Financial Analytics

Compared to the yields on money market funds, Bond and Fixed income funds are currently providing better yields, but they are not the best in the industry currently.

Stanbic IBTC

READ: Nigeria’s Pension Asset increased by N228 billion in October

This shows that investors are moving their fund investments in such a way as to derive better returns than what is obtainable from money market funds without necessarily incurring too much additional risks in the process.

Asset management implications: What is currently playing out in the Nigerian mutual fund arena is an indication that investors are cognizant of events in the market and are therefore actively managing their investments by moving them around among asset classes that are better able to give them better returns.

Explore Data on the Nairametrics Research Website

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Commodities

Oil prices up, Oil traders seek help from OPEC+

Oil traders hoping on OPEC+ meeting scheduled to hold in some days time could see the organisation extend current cuts by 3-6 months.

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Saudi, Russia agree to cut oil by 20 million barrel, Further oil production cut required to keep oil price above $40 in 2020 , OPEC + deal to boost Nigeria’s earnings by $2.8 Billion

Oil prices extended its upside at Monday’s trading session. Oil traders are riding bullish on the macro that Organization of the Petroleum Exporting Countries (OPEC), Russia, and other producers – a group known as OPEC+, will support oil prices amid the COVID-19 viral attacks going on at unprecedented levels.

  • At the time of drafting this report, Brent crude futures gained 0.4% to $45.14 a barrel
  • U.S oil-based derivative, U.S. West Texas Intermediate crude, gained 0.2% to $42.52 a barrel.
  • Both major oil benchmarks gained 5% last week.

READ: FG says recent petrol price increase linked to Pfizer Covid-19 vaccine success

What they are saying

Top expert, Stephen Innes, in a note to Nairametrics, gave key fundamentals, driving the bullish trend prevailing at the world’s black fossil market,

“The enthusiasm to buy risk-on positive vaccine headlines last week has somewhat tampered with the limited good news this week (improved Pfizer efficacy, Moderna efficacy, AstraZeneca positive signs for immune response in elderly). With Europe at the peak of the second wave of infections, investors are reassessing the European reallocation story and the short USD story.

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READ: U.S dollar drops, Currency traders fear increasing COVID-19 caseloads

“Oil ended the week up 5%. The oil market is pricing a return to normalcy from the middle of 2021. Indeed this is visible in the time spreads tightening further. The WTI Dec21/Jan22 spread traded in backwardation today, a clear move in tightly supplied markets.”

What this means

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Oil traders hoping on OPEC+ meeting scheduled to hold in some days time could see the organisation extend current cuts by 3-6 months.

READ: Uber, JP Morgan Chase, Moderna gain, COVID-19 vaccine triggers U.S Stocks Up

Bottom Line

Oil traders expect that OPEC+ meeting on November 30 and December 1, is at delaying the tapering of their 7.7 million barrels per day (bpd) cuts by around 2 million barrels per day from January 2021.

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