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 Financial Times 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 … 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 MARKET 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: TADAWUL-

The TASI rose 1.2% yesterday on turnover of SAR 8.3 bn. The index is up 5.5% YTD.

In the green: Salama (+6.6%), Jabal Omar (+6.3%) and SSP (+6.2%).

In the red: Cenomi Retail (-8.4%), Savola Group (-3.3%) and Saudi Cable (-2.7%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.3% yesterday on turnover of SAR 59.9 mn. The index is up 6.3% YTD.

In the green: Al Mujtama Medical (+9.7%), Amwaj International (+7.1%) and Al Hasoob (+6.8).

In the red: NBM (-9.4%), Riyadh Steel (-8.5%) and Al Rashid Industrial (-6.9%)

CORPORATE ACTIONS-

#1- Shareholders of dairy giant Almarai have approved the distribution of a SAR 1 bn dividend for 2023 at SAR 1 apiece, it said in a disclosure to Tadawul yesterday. Dividends will be distributed Tuesday, 16 April.

#2- Pilgrimage sites developer Jabal Omar has submitted an application to the Capital Market Authority (CMA) to raise its capital by SAR 547.5 mn through a debt conversion, it said in a disclosure to Tadawul yesterday. The move, recommended by Jabal Omar’s BoD in December, will see the developer convert the SAR 547.5 mn debt owed to creditors Central District Cooling Company and Makkah Construction and Development Company into ordinary shares.