Market Mantra: Fourth straight week we are bullish, but be watchful with NAB

The world hopes the demand for Gold from India will start boosting the prices again.

Australian shares notched up a fourth straight weekly gain supported by tech stocks and gold miners. As worries about US inflation spiking out of control eased the investors were back in the market taking Australia to new highs.

Gold miners however were best performers as Gold notched towards the US 1900 mark. Bellevue Gold and Newcrest Mining were both big beneficiaries of price increase in Gold bullion.

Technology shares also recovered following leads from the NASDAQ exchange with Afterpay outperforming the benchmark index. We expect Afterpay to continue with recovery this week with inflation worries easing and investors moving back into tech stocks.

- Advertisement -

The Financial stocks however made losses with all Big Four banks closing the week in the red. NAB posted a 3.8% weekly loss, recording its worse week since October 2020 after AUSTRAC revealed the bank is under investigation for suspected breaches of anti-money laundering laws.

Representative Picture; Market @Canva
Representative Picture; Market @Canva

The good news also from Australia came with Melbourne ending its lockdown on Friday, albeit with some restrictions remaining. As the lockdown ends, we expect the economic activity to ramp up again, however, things could flare up again and a strong vaccination drive is necessary to keep Victoria out of lockdown.

Victoria’s snap lockdown weighed both on business and consumer confidence as both fell back in May/June. However, the good news is that both business and consumer confidence data remain strong and as lockdown gets further relaxed, this should reflect in Australian shares that are already on a record high.

We remain confident of Australian shares moving towards the 7400 marks in the coming weeks on improving global growth and earnings helped by more vaccines. As Iron price continues to rally and with Macquarie boosting the earnings outlook for BHP, RIO, and FMG we dovish on all three miners. However, tech space, particularly Afterpay is where we see the biggest potential as market conditions improve and economic activity starts again.

We continue to remain bullish on A2Milk as well as China continues to provide strong data.

Last week we spoke about the likelihood of export base healthcare companies such as CSL and Pro Medicus continuing to rally as vaccine drive increases. Both the shares did not disappoint us. With G7 likely to sign off on more vaccine rollout and helping other countries we expect these shares to continue with their strong momentum.

- Advertisement -
Australian Gold; Picture Source: @CANVA
Australian Gold; Picture Source: @CANVA

Gold miners had one of their best weeks as gold prices rallied towards USD 1900. However, a sell-down on Friday night meant Gold closed the week slightly lower on USD 1877/ounce. A weakness that may reflect back on Newcrest and other gold miners when markets open on Monday.

Gold is often seen as a hedge against inflation and with inflation worries easing on Friday we may see an eventual pullback in Gold prices. The good news however comes for gold in the form of Indian jewellers.

With restrictions easing across India over the weekend and Indian jewellers slowly lifting shutters again, the world hopes the demand for Gold from India will start boosting the prices again. For May India’s Gold imports increased nine times from their lowest point in 2020, with many dealers hopeful of a rebound with easing restrictions.

Indian Gold Jewells; Picture Source: @CANVA

Oil prices also continued to rise for a third straight week on a positive outlook that increases in vaccination around the globe will open up economies faster and as such boost the oil demand. Ease of restrictions in India, oil’s third-largest importer in the World, have also boosted oil price to trade at a multi-year high.

The cryptocurrency has continued to decline all through last week. Bitcoin’s meteoric rise is more and more looking like thing of the past and with every week the price fails to recover the move back to old highs of US 64,895 looks harder.

The news coming from the US that the FBI hacked back $2.3 million of Bitcoin back in Bitcoin ransom paid to the Dark side last month added in selling pressure for Bitcoin as investors were worried it is not as anonymous or secure as they thought.

Bitcoin; Picture Source: @CANVA

The price fall however was stabilised as El Salvador adopted it as its legal currency. The good news however is there still seem to be a lot of support around the $31,000 mark. There seems to be enough demand at the moment to buy at dips for Bitcoin. However, we can see the price ranging between USD 30,000 and 40,000 for the time being with more volatility to come.

Etherium got hit by decline harder. All eyes are now on other countries like El Salvador which previously relied on the US dollar as their currency. However, with more countries working towards cleaner energy we may see a shift more towards cleaner greener coins such as Cardano, IOTA and Stellar Lumens.

The Australian dollar has had a rising trend which we are likely to see continue for the next 12 months. We remain bullish it will reach up to USD 0.85 by the end of the year. A rise in Gold and Iron prices ave helped the Australian dollar continue to rally against most of its peer and as they continue to rise we see it continue to go up.

Having said that we are also keeping a lookout for simmering tensions with China, Australia’s largest trade partner, which may bring the Australian dollar down. In regards to Indian Rupee, the Aussie touched a high of INR56.74 on Friday. All eyes will be on RBA minutes next week and a dovish statement from the RBA governor can see the Australian dollar continue to improve against the Rupee and other global currencies.

Australian Dollar; Picture Source: @CANVA

In agricultural commodities, Wheat had an interesting week. An unexpected tender by South Korea to purchase 65,000 tonnes of Wheat tried to boost the wheat prices. However, the Ethiopian government cancelling an order of 400,000 tonnes of wheat quickly soured the mood for European traders.

The deadline for submission of tender was 14 June. European traders who were preparing for the tender expect the tender to be re-issued soon. A failure to do so may result in an extra supply of Wheat thus pushing the prices down. Russia, the world’s largest wheat exporter, has reported a better than expected wheat crop season, which could further increase the supply of wheat compared to demand.

Corn prices remained flat as demand for corn thinned due to rising prices. A recent fall in soybean prices made it more attractive and there was a shift in demand from corn to soybean products especially around the Gulf coast. We however remain bullish towards corn as China and Mexico continue to buy corn in large quantities.

Author: Ateev Dang is a trader and trading coach by profession. He runs Glow trades Pty Ltd where he teaches anyone who is interested in starting on their trading journey on how to trade. He can be contacted at adang@glowtrades.com.au.

Disclaimer: The writers’ opinion in the above article are his own and do not constitute any financial advice whatsoever. Nothing published by The Australia Today constitutes an investment recommendation, nor should any data or content published be relied upon for any investment activities.

We strongly recommend that you perform your own independent research and/or speak with a financial advisor or qualified investment professional before making any financial decisions.