Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities is predicting gold will hit US$3,000 and provides their top picks in the sector,
“Gold has rallied as real rates have fallen. Continued fiscal spending as governments are mending the damage from Covid-19, backstopped by central banks means that interest rates will remain low, at the same time as the economy reflates. We reinforce our $3,000/oz target. This is very supportive for gold. Similarly, silver benefits from the macro backdrop, but demand should also strengthen on the back of the green stimulus; we see $35/oz feasible next year, but also highlight that the white metal could rally to $50/oz in the medium-term.”
Analyst Mike Jalonen’s top picks in the sector are – Wheaton Precious Metals Corp., Newmont Corp., Barrick Gold Corp., Agnico Eagle Mines Ltd., Kirkland Gold Ltd., B2Gold Corp., Eldorado Gold Corp. and Franco Nevada Corp.
“@SBarlow_ROB BoA: Gold to $3,000” – (research excerpt) Twitter
Bank of Montreal economist Benjamin Reitzes wrote that the rally in commodity prices is boosting the loonie,
“The comeback in commodity prices over the past three months has been nothing short of shocking given the still depressed level of global economic activity. The rebound has been led by energy (though it’s still down over 20% y/y), forestry and metals. If you’re wondering why the Canadian dollar has staged a decent comeback, firmer commodity prices should be close to the top of the list. Broad US$ weakness is up there as well and has also contributed to the rise in commodity prices. Note that the BoC’s commodity price index is still about 8% below 2019 year-end levels, so there’s still some wood to chop”
“@SBarlow_ROB BMO: Commodity comeback boosts loonie” – (research excerpt) Twitter
Citi strategist Chris Montagu notes that bank stocks are holding back returns for global value investors,
“Value continues to slide. Despite the ‘euphoria’ in equity markets in July, Value delivered negative returns consistently across global markets. Two decoupling forces were at play: (1) the Cyclicals/Defensives trade has not rallied with equities, (2) Banks – which feature highly in the Value basket - have decoupled from equities since the trough on March 23rd … Short-term, our model is negative on Value for all regions and positive on Quality and Low Risk (strongly so for the US and Europe).”
I would like to see the cyclical/defensives trend turn higher as a sign markets believed in the global economic recovery. It would also help broaden out market leadership beyond technology.
Newsletter: Are value investors using the wrong tools again? – Globe Investor
Diversion: “Astronauts recount wild ride home on SpaceX’s Crew Dragon” – Reuters
Tweet of the day:
Real US yields are record negative. But unlike after 2008/9, this isn't helping EM currencies, which are under pressure again. In my view, this shows that the key driver of the post-2008/9 rebound in EM FX was China's stimulus via its boost of commodity prices, not the dovish Fed pic.twitter.com/a9fOupzuIG— Robin Brooks (@RobinBrooksIIF) August 6, 2020
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