Commodities

A Likely Slower Grind Higher for Gold

_{Posted on May 18, 2020}

The current gold bull market started in December 2018 and hit its growth spurt a year ago, in May 2019. Spot and futures prices have rallied 30-35% since that time, to the ~US$1,700/oz range, as the COVID-19 shock brought forward constructive gold market themes that were already brewing due to US-China trade tensions and global manufacturing slowdown. These bullish tailwinds for gold include: the accelerated Fed policy path to zero lower bound (ZLB) and fresh assets purchases; the global growth recession, underpinning a risk-off and highly uncertain macro outlook; net gold buying from EM central banks; and extreme asset market volatility amid robust investor inflows into gold derivatives and ETFs.

However as the gold bull market ages during a deep global recession, gold may be prone to sell-offs to the US$1,500-$1,550/oz area in coming quarters, before marching higher again. Unwinds of long gold trades could be prompted by another equity market sell-off given unusually strong gold-equities returns correlations and record gold ETF holdings.

“Lower for Longer” interest rates are supportive of Citi analysts’ positive view on gold. However, there is concern over the large divergence between record strong investor demand for gold and a record weak retail bid for gold (e.g. jewelry). Combined with reduced net buying from the official sector and a potential increase in gold recycling for the rest of 2020, Citi analysts think prices may make a slow grind higher but generally hold between US$1,600-$1,700/oz, rather than quickly spike to the US$1,850-$1,950/oz area. In turn, a global growth and EM recovery in 2021 could be what supports the next leg higher towards US$2,000/oz.

Overall, Citi analysts remain medium-term bullish. Forecasts for Q2 average gold prices are upgraded to US$1,710/oz and 2020’s average lifted from US$1,640/oz to US$1,680oz, while maintaining 2021’s average at US$1,925/oz.

_{By Citi Wealth Insights | Jun 20, 2022}

Commodity markets in spotlight as geopolitical conflict rolls on

Oil prices should soften by year-end. Even as Russian oil output falls, with EU banning waterborne imports of Russian oil by year-end, a global GDP slowdown, high prices, and China’s zero-COVID policy are all hitting demand

Commodities

_{By Citi Wealth Insights | May 4, 2022}

Commodity markets in spotlight as geopolitical conflict rolls on

The geopolitical situation remains fluid and an escalation in the Russia-Ukraine conflict may buttress risk-on investor flows. Even as Russian production slides, a global GDP slowdown is hitting oil demand, relief for sanctions on Iran could be on the way, and non-OPEC+ supply is growing fast while Strategic Petroleum Reserve releases could now total 300-m bbls this year.

Wealth Insights Commodities

_{By Citi Wealth Insights | Apr 5, 2022}

How long will geopolitics upend commodity markets

Given today’s unique conditions, the GIC has further enhanced its asset allocation with the addition of tactical exposures to natural resources, oil services firms and gold that aims to add diversification and serve as a possible hedge against tail risks.

Wealth Insights Asset Allocation Commodities

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This communication does not constitute the distribution of any information in any jurisdiction in which it is unlawful to distribute such information to any person in such jurisdiction.

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This communication is for general information only and should not be relied upon as financial advice. The information herein has no regard to the specific objectives, financial situation and particular needs of any specific person and is not intended to be an exhaustive discussion of the strategies or concepts mentioned herein or tax or legal advice. Any person interested in the strategies or concepts mentioned herein should consult their independent tax, legal, financial or other advisors,
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