The Market Report 1st March 2021

What is going on with The Markets?  Equity Markets down; Commodity Markets down; Cryptocurrency Markets down.  Where is all the money going?


It has definitely been a strange week to see so many asset classes on the downward trend.  So, before I tell you where the money is heading, let’s look at what has happened in the markets this week.


Gold prices dropped, mainly due to the strengthening dollar.  However, Silver continues to be of more interest with the already overstretched and under supplied markets.


The COMEX Market is being squeezed and this has resulted in contract ratios reaching an all time high.  The COMEX made the decision to settle contracts in cash if needed rather than silver or gold which is their preferred method and has been for many years.  But there’s always been the expectation that they have gold and silver reserves stored in vaults.  The ratios as of Friday are Gold 87.94:1 meaning they have 87.94 gold ounce paper contracts for each 1 ounce of physical gold in reserve.  The silver ratio stands at 188.42:1.

 

Demand for silver has seen a lot of traditional brokers unable to meet supply orders with many having warnings on their websites that orders are delayed for 3 – 5 days or even weeks.  Pre-orders being taken for when physical deliveries are received. Never has there been a better time to hold the physical asset than now.  If you can get your hands on some.  The short supply will kick in soon and see prices start to rise.


One of the hardest hit markets, has been cryptocurrency with all coins taking a downward trend – sitting at 30% drop – as I write this report.

 

FOMO (Fear of missing out) has been a big driver into the market since Elon Musk mentioned his $1.5B investment into Bitcoin.  This resulted in Fortune 500 companies and city councils moving assets on their balance sheets into crypto.

In Canada, two ETF’s were issued with Bitcoin as the underlying asset.  The ETF took record deposits in the opening two days before settling down.


Cryptocurrencies rallied at the interest with high trending returns but also unrealistic high returns and a retracement was due.  It will be interesting to see what happens over the coming days and weeks as to how much support is there to stop the cryptocurrencies falling anymore.


Equity markets have, in my opinion, been falsely high with no underlying value in the companies to justify the high prices. So, it has been interesting to see money flowing from equity markets, commodities markets and cryptocurrency markets into Bonds.


Bonds have reached a 10 year high with a lot of money pouring into them.  The high interest rates are a concern as often the 10 years rates are an indication about what is seen as the most likely scenario for future rates and inflation.


It will definitely, be worth watching the markets closely.  If the bond market is an indication that we could see higher interest rates and inflation then the very assets being deserted at the moment will certainly be the ones to get into and hold now while the prices are low as they will be the ones that the money flows into when reality comes back to the markets.