ReportWire

Tag: record highs

  • The US dollar is so strong that China’s central bank, among others, just keeps loading up on gold

    The US dollar is so strong that China’s central bank, among others, just keeps loading up on gold

    Robust Chinese gold buying has sent prices of the precious metal to record highs.Reuters

    • China’s economy is struggling, leading to a surge in gold purchases as a safe-haven asset.

    • Central banks are on a gold-buying spree, contributing to record-high spot gold prices.

    • Other central banks are also snapping up gold to diversify their assets on the back of a strong greenback.

    China’s economy is in a funk and people are rushing out to buy gold as a safe-haven asset to hedge against economic uncertainties, sending prices of the precious metal to record highs.

    The country’s central bank has also gotten into the act, adding 60,000 troy ounces of gold to its stash in April, according to official data released on Tuesday. It marked the 18th straight month the People’s Bank of China was piling in on gold.

    But it’s not just about economic uncertainty. The heightened interest in gold is also a pushback to the strong US dollar, which is making it too expensive for emerging nations like China to import goods.

    The Dollar Index — which measures the value of the green against a basket of six other currencies — has risen 4% this year and 10% since the start of 2022. This is due to the Federal Reserve’s interest-rate hikes since March 2022, which tend to strengthen the dollar.

    The Chinese yuan has lost 1.6% against the dollar this year to date. It’s down 4% over the past 12 months and about 12% lower against the greenback since the start of 2022.

    Other central banks are also loading up on gold. Big gold buyers include China, Turkey, and India, the World Gold Council, or WGC, wrote in a report last week.

    “Accounting for almost a quarter of annual gold demand in both those years, many have attributed central banks’ ongoing voracious appetite for gold as a key driver of its recent performance in the face of seemingly challenging conditions: namely, higher yields and US dollar strength,” wrote the council.

    In all, the world’s central banks bought 290 tons of gold in the first quarter of this year — the strongest start to any year on record, per the WGC.

    Central banks are not done buying gold

    Even though central banks have bought a whole lot of gold since 2022, they may not be done yet, said the WGC.

    “Not only is the long-standing trend in central bank gold buying firmly intact, it also continues to be dominated by banks from emerging markets,” the WGC added.

    Emerging market central banks that bought gold in the first quarter of the year include Kazakhstan, Oman, Kyrgyzstan, and Poland.

    There are political motivations for central banks to diversify their assets, too.

    “It has become apparent that in some cases, nations that are not allied with the United States have begun to look to reduce their reserve mix away from dollars, as they perceive the risks of keeping these reserves vulnerable to sanctions,” JPMorgan analysts wrote in a March report.

    Governments aligned with the US are also adding gold to protect themselves against higher and more volatile inflation globally, the JPMorgan analysts added.

    The rush into gold assets may not bode well for the US dollar in the longer run, should the currency continue to gain.

    “A stronger USD would weaken its role as reserve currency,” economists at Allianz, an international financial-services firm, wrote in a report on June 29. “If access to USD becomes more expensive, borrowers will search for alternatives.”

    The spot gold price is now around $2,330 an ounce, off its record highs above $2,400 an ounce in April.

    Read the original article on Business Insider

    Source link

  • An 'extremely rare' stock market signal with a 100% accuracy rate is flashing and points to record highs in 2024

    An 'extremely rare' stock market signal with a 100% accuracy rate is flashing and points to record highs in 2024

    Spencer Platt/Getty Images

    • The stock market is likely to see record highs in early 2024 after an “extremely rare” signal just flashed.

    • That’s according to Carson Group chief market strategist Ryan Detrick, who highlighted another sign that breadth is improving.

    • “We continue to expect stocks to do quite well and we remain overweight equities,” Detrick said.

    An “extremely rare” signal just flashed in the stock market, suggesting to Carson Group chief market strategist Ryan Detrick that record highs are imminent.

    Detrick highlighted in a Thursday note that more than 60% of all components in the S&P 500 hit a new 20-day high last week. This runs counter to the idea that mega-cap tech companies are driving the bulk of the gains in the stock market.

    “Last week, we saw a very rare breadth thrust, which suggested many stocks were surging, which tends to be a signal of impending strength,” Detrick said. “This is extremely rare and showed a lot of buying has taken place recently, not just in a few large stocks.”

    Since 1972, this rare signal has flashed 15 times, not counting last week’s signal. The S&P 500 was higher a year later 100% of the time after the signal flashed, generating an average return of 18%.

    If a similar gain occurs over the next year, the S&P 500 would trade at just above 5,400, which exceeds even the most bullish stock market forecasts.

    S&P 500 returnsS&P 500 returns

    Carson Group

    Detrick highlighted that there have been other bullish signs in the stock market in recent weeks, including the S&P 500 surging 8.9% in November, representing its 18th best month ever.

    When measuring the S&P 500’s 20 best months of performance, stocks were higher 80% of the time a year later, with an average gain of 13%. And when counting the 30 months in the S&P 500’s history when gains were at least 8%, stocks went on to rise 90% of the time in the following year.

    “Once again, this signals the strength we just saw was likely the beginning to more strength, not the end,” Detrick said.

    Finally, he noted that the S&P 500 hasn’t hit a record high since January 2, 2022, nearly two years ago. With stocks less than 5% away from new highs, Detrick said he expects a record high to be hit in early 2024, and if that happens, it would be one more bullish signal.

    “Previous times stocks went at least one full year without new highs and then hit one, the future returns were very solid. In fact, stocks were up 13 out of 14 times a year later and up 14.9% on average after long streaks without a new high and then finally making one,” Detrick explained.

    When combined with the “extremely rare” technical breadth thrust signal that flashed last week, all signs are pointing for a continued bull market in 2024.

    “Any one of these signals by themselves could be argued to be random, but when you start stacking them all on top of each other, we continue to expect stocks to do quite well and we remain overweight equities,” he said.

    Read the original article on Business Insider

    Source link