SAXO Bank: “Gold will be the best performer”

Danish world banking and investment giant, Saxo Bank recently put forward its assessment of the next half year and it will be music to gold owners’ ears.  This is a little of what they had to say:

“The biggest “news” is that we are very close to the secular low in interest rates globally. This will have material impact on stocks, fixed income and asset allocation over the coming one to five years, and probably an “upside-down” return profile relative to performance since the financial crisis started. Commodities will outperform and yields will move up by another 100 bps before Europe once again slides to downturn and the US flirts with recession in early 2016.

The headlines for the next 6-7 months say:

  • US, German and EU core government bonds will be 100 bps higher by and in Q4 before making its final new low in H1 2016. US 10-year yield will trade above 3.0% and Bunds above 1.25%
  • Energy: WTI crude will hit US $70-80/barrel, setting up excellent energy returns.
  • US dollar will weaken to EUR1.18/1.20 before retest of lows and then start multi-year weakness.
  • Gold will be the best performer in commodity-led rally. We see 1425/35 by year-end” [AUD1850/oz]

“The financial world today is now an island on its own – separated from the real economy, as can be seen by the paradox of record high valuation in the stock market coinciding with record low inflation, employment , productivity and no hope. There is asset inflation, but deflation in the real economy.”