Gold run

Weekly update — 3 August 2020

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Markets last week

While equity was down, gold rallied again — the NIFTY was down 1.1% (and down another 1.6% on Monday), while Nippon Gold ETF was up 4.9% last week. A fall in real yields in the US caused a run-up in gold. Last week, the Fed maintained a grim outlook and vowed to keep overnight rates at 0%–0.25% until the economy picked up; this prompted lower real yields, as markets priced in a longer-than-expected low-interest-rate regime — real treasury yields reached -1.1% on Friday. Simultaneously, in search of protection against inflation, investors moved to gold.

The NIFTY saw withdrawals last month from domestic institutions, while foreign institutional inflow remained strong. The difference between them peaked last week, resulting in a downward movement.

Job cuts continue

Standard Chartered announced several hundred job cuts worldwide — there are a lot of concerns surrounding the US July jobs report (due this week) as experts worry about a stalling labour market recovery

Startups have begun a second round of cuts — Swiggy and CureFit announced further layoffs last week

Car sales are back, for now

Car sales were back in July, down only 1% compared to last year — however, this is due to unlocking of three-month demand and it represents dealer orders (and, not actual registered vehicles)

Maruti Suzuki announced that demand for small cars increased 10%, and the number of first-time buyers increased by 5.5%

Mixed signals from the industry

PMI was down to 46, from 47.2 last month — firms continue to struggle as clients remain in lockdown

The government expanded the loan-guarantee scheme for small businesses and proprietors

Domestic steel companies are reporting price increases in July — increase in local demand was cited as a reason

Global concerns remain

The Eurozone and the US officially entered a recession — US, France, Spain and Italy reported double-digit contractions in economic output

Allocation changes

No changes to allocations. Early next week, we will introduce global allocations in the mix — do wait for our note.

Do let us know if you have any queries or concerns.