Don't forget that you can now follow Forex.com's research team on Twitter: http://twitter.com/forexresearch

A couple of things:

  •  Emerging market equities could be turning a corner - this isn't necessarily bad news for developed markets
  •  The sweet spot for silver: grey metal moving in line with global inflation expectations

Emerging market equities:

EM equities have underperformed developed market equities since the start of the year. However, the decline in EM stocks is losing momentum as the chart below shows. It is the spread between the MSCI EM index and the MSCI world index. The spread has bottomed after falling sharply since the start of the year. This sets the stage for a potential rebound in EM equities, which may signal some short-term negative price action for developed market equity indices as capital flows away from Western markets into the East.

Spread MSCI Emerging Markets - MSCI World

width=630

But, in the longer-term the fate of emerging market indices and developed world indices are deeply inter-related. As the chart below shows, the two have moved together closely since 2005. Thus, what's good for EM is good for developed market indices. Hence, indices in the West have rallied during the pullback in emerging market stocks, but they might struggle to gain traction if EM markets fell into a sustained bear market. Vice-versa is also true.

MSCI world (orange line) and MSCI Emerging Markets

width=630

Silver: in a sweet spot

Gold has traditionally been seen as an inflation hedge, but there is growing evidence that silver is being used as a way to for investors to hedge against price increases too.

The chart below shows silver (green line on chart below) and 10-year Treasury bonds. As Treasury bonds fell (yields rose), silver staged an impressive rally since the end of January.

2 factors pushed bond yields higher (prices lower), which have an effect on the silver price

1, fears about future inflation due to the Federal Reserve's lose monetary policy

2, expectations that US growth will outperform this year

Since silver is also an industrial metal, its price should rise with an improved global economic outlook.

Thus, as long as the global economy is expanding and inflation doesn't threaten growth, this is good news for silver.

width=630

Levels to watch out for in silver:

The sharp move higher recently shows no sign of abating and momentum is on the side of further gains in the silver price.

Resistance: Silver is at a multi-decade high, so above here ($33.40/50 per ounce) investors will probably look at take profit at the round numbers including $35 per ounce then $40 per ounce.

Short-term support : $30 per ounce, then $29.35 - the 50- day moving average.

Daily candlestick chart for Silver ($ per ounce)

width=630

Best Regards,

Kathleen Brooks| Research Director UK EMEA | FOREX.com
d: +44.(0).20.7398 5024 | f: +44.(0).20.7929.2010 | e: kbrooks@forex.com| w: www.forex.com/uk
12 Camomile Street | 9th Floor | London EC3A 7PT
Now you can follow us on Twitter: http://twitter.com/forexresearch
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Authorised & Regulated by the Financial Services Authority
Forex and other leveraged trading can involve significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary. This email contains confidential information belonging to FOREX.com and is intended solely for the addressees. The unauthorised disclosure, use, dissemination or copying (either whole or partial) of this email, or any information it contains, is prohibited. FOREX.com assumes no responsibility for errors, inaccuracies, or omissions in these materials. FOREX.com does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. We respect your privacy. Email addresses are not released to third parties.
FOREX.com UK a trading name of GAIN Capital - FOREX.com UK Limited and is authorised and regulated by the FInancial Services Authority. FSA No. 190864.