Goldbug nation

Gold hit another record high yesterday, hitting USD 2,299.70 in after-hours trading after the US Federal Reserve signaled it would still probably push ahead with rate cuts later this year.

But longtime market watchers are finding it hard to interpret what drove a 7% gain in the past 10 days or so, the FinancialTimes writes.

“The quietest, most confusing rally”: Pundits the FT spoke with say none of the factors that have driven the metal’s bull run in the past year and a half are in play now. “Those include record levels of central bank buying, Chinese households looking for havens for their money or the war in Ukraine and the Middle East.”

So, what could it be? There’s absolutely no consensus. Possibilities include:

• A move into gold as a hedge against volatility (tense elections around the world this year, Chinese rhetoric on Taiwan, uncertainty about the regional banking industry in the US);
• Momentum traders piling into the asset class as it continued to climb;
• Retail “stealth buyers,” whose transactions are more difficult to track (think: heavy retail demand in countries like China and Egypt).

So is gold going to tumble? It’s a split decision. Some pundits worry that if they don’t understand what’s driving the market, it’s a sign we’re due for a correction. A Standard Chartered analyst, on the other hand, says, “It does look like we have new [durable] appetite in the gold market. There are too many unknown events that investors want to hedge for,” she said, citing elections, risks of conflict escalation or the return of a banking crisis.

INTEREST RATE WATCH-

Rate watchers on both sides of the Atlantic were reading the sheep’s entrails yesterday, parsing Eurozone inflation data and Fedspeak for signs of when we might see rate cuts in advanced economies.

In Europe: Inflation is expected to fall 0.2 percentage points to 2.4% in March on average across the Eurozone, according to preliminary estimates released yesterday by the EU statistics agency Eurostat. Falling inflation will bolster expectations that the European Central Bank will cut interest rates as early as June, but not at next week’s meeting.

In Amreeka: Jay Powell says “it is too soon to say whether the recent [inflation] readings represent more than just a bump. We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2%.” We should see rate cuts this year, the commentocracy thinks, but it’s anyone’s guess when.

THE MARKETS THIS MORNING-

The Kospi and Nikkei are both up in early trading this morning, but markets are closed in Shanghai and Hong Kong as China observes the Qingming festival. It’s also a national holiday in Taiwan. US and European futures inched higher overnight. The Dow has edged downward in the last three trading sessions, while the Nasdaq and S&P 500 inched up yesterday.

Sound smart: The Qingming festival is sometimes called the “tomb-sweeping festival” in the Western press. Families get together to spruce up their ancestors’ graves and will traditionally leave commemorative offerings including incense sticks, flowers, folder paper creations, and food.

THE CLOSING BELL-

The EGX30 was essentially flat at yesterday’s close on turnover of EGP 2.2 bn (56.1% below the 90-day average). Regional investors were net sellers. The index is up 12.2% YTD.

In the green: Elsewedy Electric (+6.4%), Orascom Development Egypt (+3.7%), and Sidi Kerir Petrochemicals (+2.2%).

In the red: Mopco (-4.9%), Abu Dhabi Islamic Bank (-3.7%), and Eastern Company (-3.4%).