Commodities
Gold prices tumble, U.S dollar up
At about 6.11 am West African time, Gold futures lost about 0.39% to trade at $1866/ounce.
The yellow metal was down at the fourth trading session in London. The selling pressure seen lately in the gold market is coming on macros revealing Pfizer’s safety data to advance its COVID-19 vaccine to the U.S. Food and Drug Administration for approval, coupled with the U.S dollar rebounding up.
At about 6.15 am West African time, Gold futures lost about 0.41% to trade at $1866.20/ounce.
READ: U.S dollar up, Currency traders focus on U.S election
What this means
The rebound seen lately in the U.S dollar has helped diminish appetite for the precious metal with the U.S dollar rising, as global investors move from stocks to the more risk-averse asset. A stronger U.S dollar makes the yellow metal more expensive for holders in other major currencies.
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Adding more woes to gold bulls include reports from Pfizer/BioNTechvaccine team that they have enough safety data to advance their COVID-19 vaccine candidate to the U.S. Food and Drug Administration for approval within days.
What you should know:
- Global Investors buy the hard safe haven asset mainly to hedge against inflation and for wealth preservation.
- Gold traders, global investors also consider buying gold as a way of diversifying risk, via using futures contracts and derivatives.
READ: Covid-19: Pfizer, BioNTech say their vaccine is now 95% effective in completed study
What they are saying
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, spoke on the prevailing reports affecting the precious metal market.
“Gold markets remain pretty stagnant, but the buy on dip mentality still prevails with US Fed Chair Powell and Vice Chair Clarida sticking to script this week. Both acknowledge the surge in coronavirus cases is a big concern for an economic recovery that still has a “long way to go” and the economy will continue to need support from fiscal and monetary policy.”
READ: Gold prices under pressure, U.S dollar ticks up
Bottom Line
Nairametrics doesn’t have much of a salient view on the yellow metal in the near term, as other riskier assets (Stocks, Cryptos) are lighting up more distinctively for the eventual 2021 reflation tick up, which has lesser issues about the concerns of rising U.S Treasury yields.
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.
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.
READ: Crude oil prices up 12% in barely 4 days, triggered by OPEC+ proposed cuts
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.
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“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.”
READ: Newly created accounts for Bitcoin hit highest level since January 2018
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.
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.
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.
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.
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.
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.
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
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.
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.
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
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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