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Gold breaks out

Gold breaks out

Gold is trading above US$1,750 an ounce this morning in a sign that overall investment sentiment is fracturing. The support for the safe haven provides a stark contrast to equities, with US 30 index futures 200 points in the green and indications Asia Pacific stocks will trade higher today.

Crude oil prices are also firmer as the market looks to the expiry of the June West Texas Intermediate futures contract. The May expiry astounded many with its move into negative prices for crude, and although the June contract is trading above $30 a barrel the expiry tomorrow night will be closely followed.

In line with recent market experience the New Zealand share market is higher, giving little weight to this morning’s read on services that indicated very weak activity in April. US investors took a similar path on Friday night, pushing indices higher despite a 16.4% drop in retail sales and an 11.2% fall in industrial production.

The fracturing of markets is widening. On ongoing global rally in bonds appears focussed on the clear evidence of economic damage, whereas share markets are anticipating a spring back as lockdown measures are eased. The picture is muddied by the enormous liquidity provided by central banks, but the contradiction across asset classes must be resolved.

Further fuel is added to the data fire today. Japan GDP came in at -3.4% for the first quarter, beating a consensus closer to -4.5%. Singapore releases export numbers later this morning. Non-oil exports are forecast 19.8% lower in April. How markets will react is anyone’s guess in the current environment.

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