Market Analysis—Jan 2020

Gold has entered 2020 with strong momentum as fast-rising tensions in the Middle East stoked demand for haven asset. Palladium surged $2500 an ounce to an all-time high. Then US equities moved to best levels, also the Asian markets rose due to U.S. and China signed phase one deal easing trade tensions and China no longer currency manipulator. On 21st, China released coronavirus concerns, then WHO decide it is an international public health emergency; the U.S., Euro and Asian equities were declined in a broad sell off, also the oil and base metals headed for slump, later the equities recovered some of its losses. The economists see the coronavirus could take up to 1% off China GDP this year. From past virus cases, after the SARS outbreak during 2002-2003, the S&P fell roughly 15% peak to trough, meantime, the Ebola scare was shorter in duration, but the equity market sold off meaningfully with the S&P 500 down more than 7% in the span of about a month. The FOMC keep rates with its program of intervention to support the repo market unchanged as expected. The European Parliament approved Brexit deal making the U.K. leave the EU on Jan 31.

Gold hit 7 year peak at $1610 level twice this month, but the stocks moved down and showed leading indication feature of Gold price, with the volumes were running below ADV, the moving flow was driven by dedicated mining funds. We’re seeing upside potential of precious metals sector as the global economy moves down, political fears mount, negative yield bonds volume up and central banks allow inflation, also we believe that asset allocation strategy will be an important theme in precious metals sector in 2020.