Risk appetite is solid into the end of what has been a busy week for central bank updates. The USD is off its dovish Fed-inspired 5-month lows and Gold and Silver have come off their recovery highs (stronger USD makes them more expensive for non-USD buyers). This is dragging down precious metal miners such as Fresnillo (FRES) and Randgold Resources (RRS) while the UK Index index holds near March highs. In fact, as we write Gold may be in the midst of a breakdown from a bearish 3-day Head & Shoulders top reversal pattern. This could see the safehaven retrace some of this week’s $40 gains from March lows. Note also that the price of silver is static around $1600 after playing catch up with its more salubrious yellow peer.

While investors have made the most of a continued reversal in Gold’s long-term technical downtrend, rather than hoarding it as a traditional hedge for what has become conspicuously absent inflation, recent gains have slowed in March. This is understandable with the safehaven yellow metal now comfortably (20%) off its end-2015 5yr lows. An oil price which continues to creep higher (up 40-50% from recent 13yr lows) may well spark fears of an inflation revival (that needs hedging) which could hand the safehaven another leg up. However, fundamentally, the price of a barrel remains hampered by stubborn producers (Saudi Arabia, Russia, Iran) and the very real prospect of those more nimble US shale/frackers (the new swing producers in our view) rushing back to their idle rigs to drill at what is a more economically viable price. This could mean that the recent oil price recovery party that has helped buoy equity market sentiment so well of late could well be over before it’s even got started.

Mike van Dulken, Head of Research, 18 Mar