Commodities
Signs of recovery? Precious metals put since Draghi speech
The markets react quickly to political change, as evidenced by the strong performance of precious metals since Draghi's speech at the end of July. However, it will take time before that reflects a global growth recovery in hard data.
Nothing is certain, but it is showing signs of recovery
ECB President Mario Draghi as promised on July 26 to do everything to save the euro, he triggered a rally. In addition there are signs of recovery in the U.S.. Last week, the unemployment rate in the U.S. fell below 8%, the lowest level since Barack Obama took office in 2009.
Before we deal with the current economic situation in the U.S. and the euro zone, we first outline our assessment of the commodities market and our tactical asset allocation. As the chart shows, the markets react very quickly to monetary policy actions. Businesses and consumers, on the other hand need a little more time. So it will probably take a month to confirm the data our assessment of a moderate global recovery.
Overweight precious metals mined
After the strong rally in precious metals since mid-July us this segment appeared largely exhausted. Accordingly, we have within our tactical asset allocation in late September reduced our weighting to "neutral". This contributes inter alia account the fact that the investor expectation of a global recovery could soon revive the more cyclical segments of the commodity market, thus hampering the relative performance of precious metals.
High speculative positioning in gold
In addition to the outperformance of precious metals also contributed to the relatively maxed speculative positions in gold and silver to our decision. Net speculative long positions had since its low in July again risen sharply. Therefore, the mood could turn into this segment and trigger profit taking. Further expresses the third round of quantitative easing (QE3) in the U.S. interest rates further into negative territory, which explains the rally in gold to some extent. After the strong rally, the segment is expected once a breather.
Better opportunities in industrial metals
The QE3, the Fed's actions aim at improving growth expectations. Accordingly, we have set up in mid-September, an overweight position in industrial metals. Most industrial metals are trading at prices that the marginal production cost, if any, cover just barely. This segment is likely, however, to benefit from China's infrastructure projects. Moreover, monetary policy could increase the flow of capital to emerging markets. Net speculative long positions in metals remain low. Until recently, when copper was even a net short position. As zyklischstes metal copper could most of monetary stimulus and Chinese infrastructure projects benefit. That China's copper stocks are relatively low, encourages the positive assessment of copper. We therefore weighted copper over now.
Consumers and businesses will follow the market?
In addition to the metals markets, for example, the stock markets have performed favorably since Draghi's speech. Our base scenario of a moderate recovery in the global economic cycle is based on the fact that global monetary policy and improve financial conditions could strengthen the confidence and thus labor market and growth.
First signs of a recovery in the U.S.
It is, as I said, still too early for hard data that could support our baseline scenario. In the U.S., however, show up early signs of recovery. One of the most positive developments is the sharp rise in the Conference Board's consumer confidence index published, confirming the rise of Michigan Survey at the beginning of the month and is based on the friendly expectations. The index is now at its highest level since February. Was pleasing especially the more optimistic assessment of the labor market, which is climbed to the level of the previous quarter, as many new jobs were created. This indicates that consumers perceive an easing in the labor market. Besides favoring increasing signs of recovery in the property market and eased lending this trend.
Signs of stabilization in Europe?
In Europe there are still no signs of a recovery, but the output component of the PMI composite index rose moderately in the past two months. This points to a sideways trend development on base. The improvements in the relationship between new orders to inventories that are emerging in the global PMI missing, but in the euro zone, so far there is little chance of recovery. It is encouraging, however, that the employment component rose in July by nearly three points. 47.7 The rate is still contracting and unemployment (11.4% in August) may rise in the coming months so on. The burden clearly consumer confidence, which is crumbling further.
The euro zone needs to improve the expectations of nominal growth and reduce the cost of borrowing at the periphery. The latter are expected in 2013 due to the recent ECB measures eventually fall. We also expect a further injection of liquidity for banks, which should improve the credit supply somewhat. The result is likely to accelerate the flow of new loans in 2013 and stimulate domestic demand in moderation. Along with an increase in global growth (and thus of EMU exports) could catapult Europe back to growth.
Politicians must react
The politicians in the U.S. and Europe must now assume their responsibilities and the pro-active central banks follow the example. Remains off, this could jeopardize the fourth quarter of the slight growth recovery. So we have to keep an eye on the political process.
