US stocks: Rally unlikely to last. Buy gold?
| LONDON
The market is trading on nothing but 鈥渉opes and prayers鈥� and this week鈥檚 bounce-back in equities will most likely be short-lived, analysts say.
, gaining for the third straight day, after Wall Street posted its best one-day performance in 2012 on Wednesday. Japanese and Australian equities rose more 1.2 percent and South Korean shares gained nearly 2.5 percent.
Olivier Desbarres, Director and Head of Foreign Exchange at Barclays in Singapore said the gains were unlikely to be sustained.
鈥淭here鈥檚 actually not been that much good news in the form of data or policy measures,鈥� Desbarres said. 鈥淚 think what we are seeing at the moment is a market that is trading on hopes and prayers鈥ope that policymakers in the euro zone, in the U.S. and in China will come up with a set of measures that ring-fence some of the liquidity and solvency problems that we have.鈥�
There is however very little indication that central banks will do anything new, especially after the European Central Bank (ECB) left the region鈥檚 key interest rate unchanged, Desbarres said.
It is also聽聽further monetary easing or extended liquidity operations, when he speaks on Thursday, he added.
Even among those who expect further central bank action, there's growing skepticism it will have a long-term impact on U.S. stocks. Morgan Stanley, for example, expects a broad-based response to slowing growth including rate cuts in China and the euro zone, and further balance sheet expansion by the Bank of England, Bank of Japan and the Federal Reserve (QE3).
But Gerard Minack, a Morgan Stanley strategist says, "If the macro picture stays weak, expect any QE3 rally to last hours or days, not weeks or months."
For markets to truly rally, Stephen Halmarick, Head of Investment Market Research at Colonial First State Global Asset Management in Sydney, says Europe has to come up with a "big picture" solution to the region's debt crisis.
鈥淢arkets are buoyed at the moment because ECB has hinted they鈥檙e going to cut rates again and do a little bit more and the Fed has hinted they鈥檙e going to do a little bit more. So it鈥檚 risk on, but I don鈥檛 think it鈥檚 going to last long,鈥� he said.
Philip Silverman, Managing Partner Kingsview Management, said investors should use the "snapback" rally to sell U.S. stocks and commodities.
The only thing that investors should be looking to add is gold, which will benefit from further monetary easing, Silverman said.
鈥淲e would expect that there is going to be some sort of movement out of the ECB鈥� some sort of movement out of the U.S. to continue doing their stimulus, which really hasn鈥檛 done anything substantial but they鈥檒l continue to try,鈥� Silverman told CNBC Asia鈥檚 鈥淪quawk Box.鈥�
Gold prices have declined in recent months, as investors have sold it along with other risk assets. But Silverman believes gold will now gain on a 鈥渇light to quality.鈥�
Spot gold prices聽edged higher in Asian trade on Thursday, building on its highest settlement in a month in the U.S. on hopes of further monetary stimulus.
Burkhard Varnholt, Chief聽 Investment Officer and Head of Asset Management at Sarasin Bank, also told CNBC he believes the precious metal will gain because of its status as an alternative currency.聽聽
鈥淚 think gold ultimately will hit $2,000 and there are two reasons behind that,鈥� Varnholt said. 鈥淥ne is continued central bank buying from Asia who are looking to diversify out of euro zone dollars and then because investors are concerned about fiscal recklessness.鈥�
