17 January 2022
Traders turn to both gold and stocks as the battle between the risk takers and the cautious takes root
14 January 2022 – The two top traded markets in the UK this week are a good proxy for what may well be a fight to win the battle for the hearts and minds of investors this year. The tech-focused NASDAQ 100 index and the gold price had two very different years in 2021. The NASDAQ was up 26% last year, while gold was uneventful and ended the year down just over 3%. The backdrop for 2022 is different - so far at least - with inflation still the main theme front and centre.
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Although gold underperformed in 2021, it hit an all-time high of $2,084 as recently as August 2020, David Jones, chief market strategist at Capital.com, says. “Yet those glory days do feel well behind it at the moment.”
Some die-hard gold bugs believe that gold is due a good year after recent struggles, Mr Jones says. “It could do well if the economic bubble does finally pop.”
Many investors believe that gold is due a good year after recent struggles, said David Jones, chief market strategist at Capital.com. "It could do well if the economic bubble finally pops."
Investors had just started to breathe a little more easily when news of the variant broke, David Jones, chief market strategist at Capital.com, says. “With vaccines rolling out and economies opening up, Covid was not at the forefront of investors’ minds, then panic set in.”
We should not overstate the damage, Mr Jones says. “At its close on Friday, the broader S&P500 had only been knocked back to where it was at the end of October, while the Nasdaq stood at a two-week low.”
It has been a cracking year for commodities, with oil rising 60 per cent, cotton up 45 per cent and sugar up 25 per cent, but this raises an old question about chicken and eggs, David Jones, chief market strategist at Capital.com, says.
“Is inflation driving commodity prices, or are commodity prices driving inflation?”
The more pressing question for private investors is this. Can it continue? “If you take the central banks’ view that inflation is likely to be transitory, then a buyer of commodities now risks getting involved near the end of the current cycle,” Mr Jones says.
However, if you think inflation will persist – and the latest shock US inflation figure suggests it will – Mr Jones reckons upping your commodity exposure could boost returns and hedge your portfolio.
“Just don’t take for granted that the great run we have seen this year is a surefire bet,” he says.
2021-08-20 - After a volatile week in many markets, the question many investors and traders may be asking themselves is whether they have overestimated the strength of the economic recovery. The price of oil is considered a useful barometer for how markets feel about the short-to-medium term future - and this week it slipped to its lowest levels in three months. It bears mentioning that July saw oil at its highest since late 2018 - but that does perhaps neatly underline the sharpness of the turnaround during August for crude.
The trading week started with Chinese economic data coming in lower than analysts were expecting. In addition to this, rising cases of the Delta variant of the coronavirus have also unnerved investors.
And to top it off, the latest statement from the US Federal Reserve was seen as signalling that it may soon start rowing back on its support for the US economy.
It would be stretching the definition to refer to the preceding events as a ‘triple whammy’ for markets, but perhaps this week revealed possible cracks appearing in what has so far felt like boundless enthusiasm from investors towards risk assets. But, let's try to maintain a sense of perspective here - it also hit fresh all-time highs this week. It is perhaps somewhat premature to start calling for the next great bear market in equities.
However, it is fair to say that investors and traders have been somewhat shaken by the various moves of this week and, even if markets rally further, we may see a more cautious approach when investors return after the summer break.
2021-08-16 - Traders are flocking to gold on European investment trading platform Capital.com. According to the platform’s trading metrics, the number of clients trading derivatives on gold went up by 248% today (on Monday, 16th August 20201) from the previous day. Over the 24-hour period, the volume of derivatives trades on gold jumped by 787%.
Before the weekend, gold was the sixth most popular market to trade on the platform. Today, gold is the number one most traded market on Capital.com. The resurgence in gold trading, however, follows close on the heels of a flash crash in gold last week.
David Jones, Chief Market Strategist at high-growth European trading and investing platform, Capital.com:
“Retail trading in gold seems to have made a dramatic comeback today. Gold ended last week under pressure with the price of the yellow metal plunging to around $60 lower, driving gold to a four-month low. For a while, not even the ongoing threat of inflation seemed to be able to help gold investors. Now we are seeing a resurgence from last week’s lows.
The contrarian approach here may suggest that some traders are convinced that the best time to buy an asset is when nobody else wants to. It does feel a little like this in the gold market at the moment - although for a sense of perspective, it is still trading above its low point hit in March of this year.
5 August 2021 - Trading derivatives in Robinhood stock (HOOD) was one of the top ten most traded markets on the European trading and investing platform, Capital.com yesterday (4/8/2021). This follows reports that Robinhood had allegedly halted trading of their own stock on their own platform as volumes surged. Chief Market Strategist of Capital.com evaluates why there is a sudden peak in interest for HOOD.
“After a disappointing market debut last week, the online broker Robinhood Markets ended Wednesday trading 50% higher than the day before. Short-term market moves can make little sense at the best of times - and this is just as true for newly listed stocks. Of course, Robinhood has been front and centre this year as the broker of choice of retail investors involved in so-called meme stocks such as GameStop and AMC. The stock price was so volatile on Wednesday that Robinhood allegedly had to stop trading of its own stock, on its own platform.
The company was a hot topic of discussion on Reddit's Wall St Bets forum this week and some are suggesting that this sharp rise is once again down to FOMO - the fear of missing out. This can potentially create real momentum in a market that could last for some time - the meme stocks earlier this year are a good example, as was the strong run for the cryptocurrency sector in May. Alternatively it could be a short-lived spike. But after the disappointing IPO, is Robinhood suddenly worth twice as much as it was last week? This could be an interesting one to watch but it wouldn't be surprising if those whose "fear of missing out" led them to buy, end up nursing a different sort of regret in the days ahead,” David Jones, Chief Market Strategist at Capital.com.
30 July 2021 - It was something of a waiting game for traders this week, with all eyes on the monthly US central bank announcement on interest rates - and more importantly any hints that it would unveil the US Federal Reserve’s (Fed) view of the state of the US economy. There was nothing too momentous from the announcement in the end. It appears that the Fed is going to wait until the economy improves further but the time for tapering its monetary support seems to be getting closer.
One market that didn't wait for the announcement before sparking into life was cryptocurrencies. Spurred along by a rumour that Amazon was going to start allowing crypto payments, Bitcoin jumped by 30% over the past week and traded at levels not seen for over a month. So far, these gains have been held onto, despite Amazon stating that the rumour was not true. While volatility is usually welcomed by traders, I am not sure the surge in crypto over the last week has really changed the landscape that much. Following the crash that started in April, Bitcoin has been stuck in a two-month sideways range, capped at around the $42,000 level. If this level gets taken out - and there have been two attempts in recent months that have failed - then perhaps we will go back to the days of the "fear of missing out" trading, and cryptos get exciting once more.
Once the Fed announcement was out of the way, it was business as usual for stock markets. Thursday saw the broad-based S&P500 push out yet again to fresh all-time highs. In line with a wider trend we have seen for most of the month, after a brief sell-off, traders took yet another opportunity to buy the dip and move out to record levels. It is said that bull markets climb a wall of worry with investors expecting a possible crash to be just around the corner. No market goes up forever but US stocks, for now at least, look like they could possibly keep their momentum as the month comes to an end.
Weakness in the US dollar lifted other markets after the Fed announcement. The pound hit its best levels in more than a month and even gold caught some momentum with US dollar weakness and the threat of increased inflation providing some traders with a couple of reasons to buy in. But I would not write off the US dollar just yet. The dollar index - the greenback against a basket of world currencies - is still up year-to-date and if inflation continues to be a concern or stocks start to lose some of their shine, we could potentially see it swing back into favour as a safe haven destination.
2021-07-01 - Although June finished off calmer than some of the market excitement in the middle of the month may have led us to expect, inflation was still a nagging concern for investors. Central bankers have continued to try and soothe any worries about the rise in the cost of living. The Bank of England governor, Andrew Bailey, is the latest, saying that any acceleration in inflation this year would likely be temporary and was just a short-term fallout from the Covid bounce-back. It remains to be seen how temporary it ends up being, but it's fair to say that markets shrugged off the mid-June wobble and it was seemingly business as usual.
In the US, the broad based S&P500 and tech-biased NASDAQ indices pushed to fresh all-time highs as the month finished. The S&P is now up a staggering 95% since the March 2020 low. It is said that bull markets climb a wall of worry, but at the moment investors seem happy to keep buying the dips, pushing stocks out to ever-dizzying heights.
Perhaps of more concern is the direction of the crude oil market. This week, we saw another multi-year high for crude, hitting its best levels since October 2018. If we see ongoing strength in oil, this is one thing that could keep the rise in inflation anything but temporary, and may give central bankers a real headache in the second half of this year.
Meanwhile, the news from Gap that it was closing its UK and Ireland stores was not a major surprise, and in early trade the shares were up slightly. The company's stock recently hit its best levels in more than five years, so this critical overhaul of its business seems to be well received so far, by investors at least - but it does suggest that they won't be the last high street big name to undertake such a shake-up.
2021-06-27 - Despite - or perhaps, because of - the beating that cryptocurrencies took last week, it has still proven to be the most popular asset class this week with our traders. If the last few years have taught us anything about the trading psychology of the crypto faithful, it's that a mere 50% collapse cannot dent their enthusiasm. There has been more stability in the likes of Bitcoin this week, which so far has been building a base above $30,000. While many fingers may have been burnt over the past couple of weeks, those who have been sidelined during the past few months are seeing this as an opportunity to get in on the cheap. Only time will tell how wise a decision that ends up being.
More traditional markets that have caught the interest of investors this week include crude oil, with something of a tug-of-war going on at the moment between buyers and sellers. If we cast our minds back to just over a year ago, May futures contract for oil famously traded negative for the first time ever, with the market effectively paying almost $40 a barrel to take oil off its hands. This week has seen crude back near its highs for the year so far, trading above $66. There is quite the split in sentiment between clients. Some expect that further economic recovery will see the price continue to soar, whilst others are betting on a price slide if US sanctions against Iran are eased and it starts supplying the world market once more.
Among individual shares, Tesla remains a popular one with our traders. The electric vehicle company has not had the best few months, with its share price in reverse from January’s all time highs. The stock was down almost 40% from the $900 level it achieved in early in 2021 but plenty of clients are viewing this as a potential bargain price and have been picking up the stock. Perhaps with the recent Bitcoin burn-out, Tesla boss Elon Musk will tweet less about crypto and more about his own business - which may help to reassure investors.
Top10 traded markets by Capital.com clients in the UK, week-to-date , as at 27/5/21,
Top 10 traded markets by Capital.com clients in Europe, week-to-date, as at 27/5/2021
AMC
DOGE/USD
GME
ETH/USD
Gold
XRP/USD
US100
AMC
Oil-Crude
Gold
AMGO
GME
TSLA
TRX/USD
SPCE
US100
Silver
BTC/USD
US500
AMGO
24 June 2021 - It has been a calmer week in markets following the interest rate-inspired fireworks we had at the end of last week. In fact, it has been business as usual for many major assets. Crude oil pushed higher again, trading briefly above $74 to set its best levels since October 2018. Both the US and NASDAQ stock market indices hit fresh all-time highs, shrugging off the volatility seen last Thursday and Friday where the threat of rates rising sooner rather than later sent investors heading for the exit.
Perhaps oil is the maket to watch in the weeks ahead and will give us a hint as to whether investors' nerves are starting to crack. There already seems to be a lot of that crude will hit $100 per barrel , which, let's not forget, famously traded negative in April 2020. When even the pessimists are starting to join the bulls, that's precisely the time to start wondering if perhaps the incredible recovery we've seen across many asset classes has gone far enough. But for now, not much appears capable of denting investors' enthusiasm for risk.
It is at times like this of course that markets could be thought to be the most vulnerable - and investors become over-complacent, as riskier assets bounce back from various mini-panics. But for now traders are happy to step in and buy the dip.
The spectre of inflation is still out there, with the Bank of England (BoE) adding its voice to the chorus of central bankers aware of the risk of rising prices, but not overly concerned. UK inflation is at a 2 year high but, like its American counterpart, the BoE expects any move higher to be just temporary. It remains to be seen whether this central bank sang-froid comes back to bite these venerable institutions later in the year. Meanwhile, the crypto faithful felt more pain this week as Bitcoin dipped briefly below $30,000 - but even that was seen as something of an early summer sale and, so far at least, it has managed to bounce-back by more than 10% in a matter of days.