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What the market is trying to tell you…

14 May 2021

It didn’t matter which paper I opened this week. Digital or a good old fashioned hard copy. There were two topics hogging all the ink: the Australian budget and inflation.

Budget night has been and gone. I’ll spare you my thoughts on the growing Australian deficit for now. The 2021 federal budget confirmed the deficit isn’t going anywhere anytime soon. We can chew on that subject another day.

Today we dance with a different devil. Has the loose monetary policy from the Federal Reserve Bank finally caught up with markets? Is the so-called inflation genie out of the bottle?

One glimpse at the commodity markets certainly makes it feel that way.

Iron ore soared to an all time high of US$237 per tonne early in the week. Putting many a-market-watcher in a tizz. The excitement wore off, and the value of the red rocks dropped about 10% while we were sleeping.

It’s a similar story with copper, sneaking past its 2010 high to hit US$4.74 per pound – or AU$13.39 per kilo for those of us who run with the metric system. Again, the other red rock reaching a new high compounded the tizz.

Big shouty headlines in local financial rags suggested the inflation beast was here. Endless money printing and knee jerk stimulus had caught up with us. Our day of reckoning had come.

The headlines were a bit dramatic.

Though, as I like to point out, one rally does not make a trend.

Yes, these are interesting price movements. The new highs for iron ore and copper may be a significant development for commodities markets. Plus they come at a time when other commodities are rallying as well. Like lumber, soybeans and oil. All up for the year. All doubling down on the fear that inflation is about to take over.

The problem though, is that all of these commodities are actually being driven by different things. Loose monetary policy isn’t the only factor lifting the prices.
What they do have in common however, is that they are all priced in US dollars.

What does that tell us?

I’ll get to that in a moment. First, let’s go through the ABCs of Investing in Gold.

The ABC of Investing in Gold

A couple of weeks ago ABC Bullion director Janie Simpson took part in the virtual Gold and Alternative Investments (GAIC) conference.

Like me, Janie is passionate about helping people understand the gold market and showing investors how accessible it is.

Janie set out to demystify gold and silver investing for those new to bullion. As well as covering new options long time precious metal investors may have never considered before.

Click below to hear the ABC of Investing in Gold.

Key Influences & Direction in the Gold Market

Now is about the time you’d think I start talking all things commodities.

I’m going to save that for next week.

Before we cover the price movements on commodities, I want you to hear from Nick Frappell.

Nick probably needs no introduction in these pages, as he’s been providing technical analysis for ABC Bullion for some time now.
Today, Nick has something a little different for you.

Last week Nick presented at the RIU Sydney Resources Round-up, and one conference-goer told Nick it was ‘one of the best presentations on gold I’ve ever heard’.

Well, now you can see for yourself why someone said that. I think after watching it, you’ll be impressed with Nick’s technical approach too.  

Below, Nick tells us what the key influences are for gold and how that will set the direction for the gold price. Click the thumbnail to watch now.

Next week, we’ll take Nick’s insights on gold, global debt and the US dollar, and use that information to decode what’s really happening in the commodities space.

Until next time,
Shae Russell,
Group Communications Manager, Pallion