Steen Jakobsen
The Bank of Japan has abandoned quantitative easing and the European Central Bank may taper its bond-buying programme, so what is the role of central banks in 2017, asks Saxo Bank’s chief economist Steen Jakobsen.
Article / 23 August 2016 at 8:00 GMT

From the Floor: Gold miners to give up some gains?

Your Next Trade
  • RBNZ head says 'rapid rate hikes' not justified, kiwi soars
  • Gold miners could be a solid short trade opportunity: Garnry
  • Crude oil looks to $45.60-$46-50/b support as rally fades
  • Market's focus remains on Jackson Hole, Euro PMIs

From the Floor
By Michael McKenna

Today's Asian session saw the kiwi soar by 60 pips after Reserve Bank of New Zealand governor Graeme Wheeler stated that a series of "rapid rate cuts" is not justified. While Wheeler did note that he remains intent on cutting rates, Saxo Bank head of forex strategy John J Hardy reports that the statement marked the RBNZ "surrendering to NZD appreciation" as its best efforts (and most explicit expressions of intent) have not managed to clip the kiwi's wings.

From Saxo Bank's Singapore trading floor, trader Tareck Horchani tells us that USD selling resumed overnight following the rally sparked by hawkish remarks from Federal Reserve vice-chair Stanley Fischer.

According to Horchani, the biggest beneficiary of the USD retrace was the South Korean won, which gained almost 1% against the greenback overnight.

Heading into the European open, we see WTI crude prices rallying after an overnight tumble down to the $46.60/barrel area. The slide lower followed a pronounced drop on Monday  from Friday's close above $49/b to the $47.35/b area. According to Saxo head of commodity strategy Ole Hansen, the rally seen last week came down to short-covering as fundamentals remain negative.

"Funds bought 118 million barrels of both WTI and Brent crude last week", reports Hansen, adding that he expects the current retrace lower to "run out of steam" in the $45.60-$46.50/b range.

Hansen also notes that producers have raised their short positions to levels not seen since 2011, with the hedging perhaps representing a lack of confidence in the rally seen last week.

Beyond oil, the other main story in the commodities space is gold, where the yellow metal is showing signs of weakness after a sustained rally that took it from just over $1,060/oz in January to $1,375/oz by mid-July.


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Source: Saxo Bank 

"Gold has held recent support at $1,330/oz, but it's showing signs of weakness," says Hansen, adding that ETP holdings have remained flat for three weeks now.

According to Saxo Bank head of equity strategy Peter Garnry, the slowdown in the gold rally could mean it is time to look at shorting gold miners, some of which have seen year-to-date gains in the 100-150% range.

Among the names cited by Garnry as potential short candidates are Randgold, Newmont, and Barrick. The trade idea follows Saxo Bank chief economist Steen Jakobsen's outlook for a stronger USD over the coming weeks.

On the data calendar, the week's most significant item remains Federal Reserve chair Janet Yellen's Friday speech at the central bank summit in Jackson Hole, Wyoming. The speech, says Hardy, could lead to a "sustainable dollar move after Friday" if the Fed chief breaks clear of the current uncertainty surrounding policy normalisation and thus the USD.

This morning also sees the release of a series of flash Eurozone PMI prints which Garnry says could be "key for short-term equity futures".

Beyond that, we have the German Ifo report for August coming out on Thursday and, in case you had forgotten, a broadly lower-growth, lower-inflation, zero-bound world that is beginning to emit strange correlation breakdowns, political upheavals, and policy crises from nearly all corners.

And as for solutions?

"The market's focus is pretty much all on Jackson Hole right now," concludes Saxo Bank FX Options specialist Kresten Bechmann.

Jackson Hole, Wyoming
Any hawks out there? Photo: iStock 

Michael McKenna is an editor at

From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.   


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