Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Cross Asset Strategy

Over the past year Gold bugs have not had it easy. While it was a brilliant performer for much of 2020, it is still negative so far this year.A few reasons explain this lack of performance. Firstly, yields have had a two-way street, both nominal and, more importantly, real yields. Yields were initially up at the beginning of the year and then generally down since March. Secondly, there has not been a clear trend on the USD – something that Gold has typically been inversely correlated to. The USD has spent as much time this year rising as it has falling and, depending on how it is measured, it is effectively unchanged to marginally up. The third reason is the emergence of Bitcoin as a viable alternative or addition to other hard assets. Whether one agrees or disagrees about Bitcoin being a serious so called ‘hard’ asset, it is increasingly being seen as such, which has played its role in taking some of the shine off Gold. However, are we approaching an interesting juncture in all three of these corners? We can all see that inflation has started to rise and serious questions are being raised about whether higher prices are short lived &amp; transitory or longer lasting. As a consequence, breakevens have risen faster than nominal yields thus leaving key benchmarks of ‘real’ yields deeper in negative territory. That is beginning to be bullish for Gold again.At the same time, the bounce in the USD has started to lose momentum and there are some signs that it may trend down, at least in some corners. Asian markets look particularly attractive as the continent makes its way forward to some form of normality – something that North America and Europe had already started to do much earlier. For those who may not be familiar, as an example, the environment in which I sit in Singapore still requires one to wear a mask, be in a group of no more than 2, not talk on the train and, enjoy one’s outing without music in venues such as restaurants, bars, cafes etc. There is a long way to go for normality to return to many parts of Asia but it is approaching and as it does, the demand which has been pent up for 2 years will start to show its various colours. Thus, the ADXY Index looks bullish. If anything, a lower USD would support Gold.Finally, there is the strange market of the bitcoin. It doubled, then halved, then doubled again all in the space of 10 months. It is now a market truly driven by feelings and sentiments. Interesting it might be then that the recent high was when the much-anticipated futures ETFs went live last week. So far (and it is very early) it appears to look like a classic “buy the rumour, sell the fact” scenario. What needs to be seen is whether that will be short lived or longer. A slowdown in the rally, a consolidation or a move down in bitcoin would likely be a bullish sign for Gold.Below we look at the price action and setups on all these markets, which should be watched closely while building either a case for, or against, the real hard asset that is Gold.We start with an index that attempts to encompass all three components - real yields, the USD, &amp; Bitcoin…

Over the past year Gold bugs have not had it easy. While it was a brilliant performer for much of 2020, it is still negative so far this year.A few reasons explain this lack of performance. Firstly, yields have had a two-way street, both nominal and, more importantly, real yields. Yields were initially up at the beginning of the year and then generally down since March. Secondly, there has not been a clear trend on the USD – something that Gold has typically been inversely correlated to. The USD has spent as much time this year rising as it has falling and, depending on how it is measured, it is effectively unchanged to marginally up. The third reason is the emergence of Bitcoin as a viable alternative or addition to other hard assets. Whether one agrees or disagrees about Bitcoin being a serious so called ‘hard’ asset, it is increasingly being seen as such, which has played its role in taking some of the shine off Gold. However, are we approaching an interesting juncture in all three of these corners? We can all see that inflation has started to rise and serious questions are being raised about whether higher prices are short lived &amp; transitory or longer lasting. As a consequence, breakevens have risen faster than nominal yields thus leaving key benchmarks of ‘real’ yields deeper in negative territory. That is beginning to be bullish for Gold again.At the same time, the bounce in the USD has started to lose momentum and there are some signs that it may trend down, at least in some corners. Asian markets look particularly attractive as the continent makes its way forward to some form of normality – something that North America and Europe had already started to do much earlier. For those who may not be familiar, as an example, the environment in which I sit in Singapore still requires one to wear a mask, be in a group of no more than 2, not talk on the train and, enjoy one’s outing without music in venues such as restaurants, bars, cafes etc. There is a long way to go for normality to return to many parts of Asia but it is approaching and as it does, the demand which has been pent up for 2 years will start to show its various colours. Thus, the ADXY Index looks bullish. If anything, a lower USD would support Gold.Finally, there is the strange market of the bitcoin. It doubled, then halved, then doubled again all in the space of 10 months. It is now a market truly driven by feelings and sentiments. Interesting it might be then that the recent high was when the much-anticipated futures ETFs went live last week. So far (and it is very early) it appears to look like a classic “buy the rumour, sell the fact” scenario. What needs to be seen is whether that will be short lived or longer. A slowdown in the rally, a consolidation or a move down in bitcoin would likely be a bullish sign for Gold.Below we look at the price action and setups on all these markets, which should be watched closely while building either a case for, or against, the real hard asset that is Gold.We start with an index that attempts to encompass all three components - real yields, the USD, &amp; Bitcoin…

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

After strengthening through early October, the US dollar has turned trendless. I evaluate the change in performance of EM currencies when the dollar was at a peak versus now. Specifically, I go over the regional and country divergences to identify the outperformers and underperformers. I also highlight the currencies where I see the most value.Separately, the attached file is a snapshot of the EM currency market in which I seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

After strengthening through early October, the US dollar has turned trendless. I evaluate the change in performance of EM currencies when the dollar was at a peak versus now. Specifically, I go over the regional and country divergences to identify the outperformers and underperformers. I also highlight the currencies where I see the most value.Separately, the attached file is a snapshot of the EM currency market in which I seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Updating EM FX Winners and Losers

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Financial Select Sector SPDR F / Technical Analysis

We continue to see a steady flow of risk-on signals that have us moving toward an outright bullish outlook for the broad US equity market. Below we discuss several bullish developments that leads us to believe we are close to exiting the "mixed market environment" that we have referenced since late March.Charts highlighted: XLF, KBE, Copper, US Dollar, IWD, XLY, Bitcoin, S&amp;P 500, APO, LPLA, ARCC, JHG, KKR, ALLY, CACC, OMF, CIT, WD, GATX, LC, CODI, WRLD, ATLC, BCPC, TROX, ASPN, ASIX, LXU, HWKN, MOS, CF, ICL, SQM, UAN, IPI

We continue to see a steady flow of risk-on signals that have us moving toward an outright bullish outlook for the broad US equity market. Below we discuss several bullish developments that leads us to believe we are close to exiting the "mixed market environment" that we have referenced since late March.Charts highlighted: XLF, KBE, Copper, US Dollar, IWD, XLY, Bitcoin, S&amp;P 500, APO, LPLA, ARCC, JHG, KKR, ALLY, CACC, OMF, CIT, WD, GATX, LC, CODI, WRLD, ATLC, BCPC, TROX, ASPN, ASIX, LXU, HWKN, MOS, CF, ICL, SQM, UAN, IPI

Upgrading Financials To Overweight; Downgrading Communications To Market Weight

As the US dollar has come off the peak, EM currencies have benefited, including Asian currencies. The Thai baht is among the currencies that have performed well lately as it has been supported by easing of curbs on falling coronavirus cases, signs of tourism picking up, raising of the debt ceiling to create space for further fiscal stimulus, and the central bank turning less dovish. While there is ample room for the baht to make up its lag with the rest of EM, the currency's recovery is likely to be gradual and marked by volatility.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

As the US dollar has come off the peak, EM currencies have benefited, including Asian currencies. The Thai baht is among the currencies that have performed well lately as it has been supported by easing of curbs on falling coronavirus cases, signs of tourism picking up, raising of the debt ceiling to create space for further fiscal stimulus, and the central bank turning less dovish. While there is ample room for the baht to make up its lag with the rest of EM, the currency's recovery is likely to be gradual and marked by volatility.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Is the Thai Baht Finally Turning?

Recent price action shows USD weakness re-emergingThree main USD indices are shared below which suggest that the<ul>
<li>DXY Index should ill fall to 92.84 if not the 92 area</li>
<li>BBDXY Index to 1,148 if not 1,138.</li>
<li>ADXY Index back up towards 110 on breach of 108.38</li>
</ul>

Recent price action shows USD weakness re-emergingThree main USD indices are shared below which suggest that the
DXY Index should ill fall to 92.84 if not the 92 area
BBDXY Index to 1,148 if not 1,138.
ADXY Index back up towards 110 on breach of 108.38


United States

The U.S. Dollar Index(USDX) indicates the general int'l value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. The ICE US computes this by using the rates supplied by some 500 banks. FOR REAL TIME SEE EIS ICEA<GO>.

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Dollar Index (DXY CURNCY)

The Renewed Case for Gold

The components that seem to impact the Gold price the most are beginning to show signs that we could see higher levels on Gold over the coming weeks.

Shyam Devani

FX Dashboard: Updating EM FX Winners and Losers

As the US dollar turns trendless, I go over the regional and country divergences to identify the outperformers and underperformers in EM. I also...

Gautam Jain, PhD, CFA

Upgrading Financials To Overweight; Downgrading Communications To Market Weight

We are upgrading Financials to overweight; Financial Sector ETFs (XLF, RYF), banks (KBE, KRE), and insurance stocks (KIE) are all breaking out to...

Vermilion Research

FX Dashboard: Is the Thai Baht Finally Turning?

The Thai baht has performed well lately on the easing of curbs and tourism picking up. While there is ample room to make up its previous lag, the...

Gautam Jain, PhD, CFA

USD Trend Re-Emerging & Asia Positive

The USD is again on the back foot and looks likely to fall. The area where the trend appears strongest is likely to be in Asia

Shyam Devani

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