Emma Wall, Chief Investment Strategist, Hargreaves Lansdown: “The FTSE 100 is in positive territory this morning, led by rises across the mining sector. This market report is at risk of becoming a gold bug’s blog as, once again, the precious metal dominates investment flows. Gold rose more than 4% yesterday as speculators look to take advantage of last week’s slump. It has been a rollercoaster start to the year for both gold and silver, with gold rising near 30% to $5,500 on 29th January driven by concerns about global geopolitics, US Fed independence and President Donald Trump’s endorsement of the weak dollar. Following the rumours that rate hawk, Kevin Warsh, had received the Presidential nomination to be the next Federal Reserve Chair, the US dollar rose in value, sparking a considerable sell off in gold. The market is reading Warsh’s nomination as a sign of rate stability – and potentially a higher for longer stance, based on his voting record. We consider his recent rhetoric to be more informing. He has spoken publicly against current levels, saying that rates should be lower, which is more in tune with Trump’s beliefs, hence the nomination.
Where does gold go from here? We don’t expect yesterday’s rally to continue with as sharp a trajectory of recent history, but we do think that gold has an important role to play in portfolios this year. There are both systemic and tactical tailwinds – global central bank buying looks set to continue, propping up base demand and the safe haven appeal of gold in times of uncertainty remains whilst global diplomacy is conducted via social media.
Turning to stocks, the biggest company news today is happening away from listed equity markets. Elon Musk has announced plans to combine SpaceX and xAI to great a $1.25 trillion company, merging the entities responsible for his artificial intelligence engine, social media, space exploration, energy generation, communications and no doubt more. This vertical integration makes sense; Musk announced during last week’s Tesla results that he would be pivoting the business away from electric vehicles to automation and artificial intelligence, and this will be true of his space travel ambitions too, meaning there are technological synergies to be made across all his businesses. What will be key is the market’s view of the valuation. Musk has previously shared intentions to IPO SpaceX, rumoured to be in June due to the auspicious alignment of the planets Jupiter, Venus and Mercury that month. While Musk has a proven track record of delivery, he is a divisive figure and will be asking the market to value a company based on a multi-decade vision, where most CEOs operate a three to five year business cycle.
Asia markets have been driven higher by positive news of a deal between US President, Donald Trump, and Indian Prime Minister, Narendra Modi. Trump announced plans on social media that we would be cutting India trade tariffs from 50% to 18%, buoying stock markets. The 50% tariff was an aggregate of 25% base tariffs plus an additional punitive measure as India had been buying oil from Russia.
The deal also requires India to drop its reciprocal tariff on US goods to 0% and buy $500 billion of “energy, technology, agriculture, coal and many more” from America, according to the President. The news caused Asian markets to rise, benefiting not just Indian stocks. News that the US is in talks with Iran has also benefited stocks – in anticipation that US support will be able to bring an end Iran’s war with Israel. The oil price has fallen as a result."
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