Record Highs Aplenty: Gold Price, Silver, Copper

Shares in London were higher in early trade on Monday amid a generally upbeat mood for European indices.  

Copper and the gold price have hit record highs, while silver jumped to an 11-year high and oil hit its highest in a week after the death of Iran’s president in a helicopter crash.  

Ryanair’s profits surged as fares rose 20% but share dipped. Japanese government bond yields rose to a ten-year high as markets eye a potential hike by the Bank of Japan. Asian shares rose to a two-year high.  

Optimism for the UK?

The FTSE 100 index added about 0.3% in early trading to 8,443 and there were similar gains for Paris and Frankfurt. US futures traded higher after the Dow Jones Industrial Average closed about 40,000 and the S&P 500 closed above 5,300 on Friday.  

A lot of attention will shift to the Nvidia earnings later this week. Today sees little data and several central bank speakers. Earlier, the PBOC left its two key lending rates unchanged.  

UK CPI data this week is expected to show a decline to 2.1% from 3.2% in March, paving the way for the Bank of England to cut rates.  

I like to be contrarian and say that June is on for a cut, but my thinking is that the BoE will be cautious and wait until August. The drop in inflation, down largely to a 12% drop in household energy costs, would take the UK way below the rate of inflation in the EU and US and do a lot to help Rishi Sunak. Delaying the election is a bet on things in the UK improving over the coming months – it could pay off.  

I discussed why there are reasons to be more upbeat on the UK economy in the latest edition of the Overleveraged podcast.

Yields Higher, USDJPY Firms

Yields ticked higher with the Japanese 10-year JGB to 0.98%, its highest since May 2013. It’s now up 25bps since March as markets think the BoJ will need to firm its stance in the face of the weak yen. USDJPY firmed up to 156 and backed off again.  

Eurozone yields also ticked higher as US Treasury yields firmed up from over one-month lows on Thursday and Friday. The German 2-year bund was at 3%, its highest in more than two weeks. Markets now see 65 basis points (bps) of cuts this year by the ECB, down from 75bps being priced earlier this month.  

Late Friday Fed governor Bowman struck a hawkish tone, saying not to expect cuts this year and reiterating she would vote to hike again if necessary.  

Gold Price Hits Fresh Record

The gold price hit a fresh all-time high and silver jumped to $32, its highest in 11 years. Expectations the Fed will cut rates soon are helping. but real rates are nothing like as low as they once were.  

There has been a clear geopolitical premium present in the markets since the October 7 attacks, while the recent death of the Iranian president may have driven some news-flow-based trade – bound to be some of that involved overnight.  

More importantly, perhaps, China has been a big buyer as the PBOC cuts Treasury holdings in favour of gold. Silver – I wondered last week if the meme stock resurfacing would prompt a move as it did in 2021 – cannot discount it, or at least shorts closing out in fear. This may have also occurred because of the move in the gold price and closing the gap in the gold-silver ratio.

The gold price is up close to 24% year-to-date as of May 20.

Geopolitical Risk Ramps

The ‘populist’ Slovak leader Robert Fico is recovering after an attempt on his life. What does Fico do next? EU elections are just a few weeks away. Does it spark a sympathy vote? Meanwhile, Geert Wilders has formed a government in Holland.  

Even if he’s not going to the PM, it’s a problem for the EU. Fragmentation is the order of the day. A couple of years ago I tweeted about the situation in the developed world being like the 1900s — defined loosely by political fragmentation and angst originating in technological advances.  

Rather than the usual inflationary comparisons with the 70s or 40s, it seems to me to be more like the pre-WWI era. I suggested political assassinations would become more common. A couple of days later former Japanese PM Abe was assassinated. An attempt was made on the Slovak PM. I do not believe he will be the last.

Iran’s president Ebrahim Raisi was killed in a helicopter crash – new elections are due soon. Foreign minister Hossein Amir-Abdollahian was also killed. Coming at a time of heightened geopolitical tensions, this news is not to be ignored.  

The question is whether Tehran starts to talk about potential Israeli or US involvement in the deaths – nothing right now on that front. Raisi was a hardliner; a new leader could take a different position. I don't think it’s going to make a lot of difference in terms of foreign policy from what I understand of how decisions are taken in Tehran and the general lay of the land.  

Meanwhile, a news flash highlighted health issues for Saudi Arabia’s king. Not much by way of market impact right now but crude prices are a little higher. Oil firmed up to test the 200-day line and 61.8% Fib level.  

Brent crude up about half a per cent to the 200-day line.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. 

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.