SOUTH AFRICA: Tsy Holds Linkers Auction, BRICS Naval Drill Begins
- The National Treasury is looking to sell ZAR1bn of 4.25% 2031 linkers, 2.25% 2038 linkers and 2.50% 2050 linkers in its first debt offering of this year. Latest available data published in mid-December showed that headline CPI inflation edged lower to +3.5% Y/Y in November and core inflation inched higher to +3.2% Y/Y against the SARB's target of +3.0% Y/Y (with a +/-1pp tolerance band). Meanwhile, South Africa's 5-year breakeven inflation rate has ticked away from multi-year lows early this year and now sits 3.40%, still at fairly depressed levels. The 10-year breakeven inflation rate is at 4.28% after hitting cyclical lows around 4% in November/December.
- South Africa hosts the BRICS group's naval exercise led by China between January 9 - 16, which raises the risk of fuelling existing tensions with the US. It is unclear which countries have contributed troops and equipment, but Chinese and Iranian warships were spotted near the South African coast yesterday, while EWN reported that Russian vessels were also expected to participate. South African officials have described the drill as a demonstration of commitment to protecting maritime trade routes and closer cooperation between BRICS members.
- The African National Congress (ANC) insisted that its decades-long alliance with the South African Communist Party (SACP) remains in place, despite the latter party's decision to contest the 2026 local elections alone. However, ANC National Chairperson Gwede Mantashe warned that the SACP would pay a price at the polls.
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GOLD TECHS: Trend Needle Points North
- RES 4: $4404.9 - 3.500 proj of the May 15 - Jun 16 - 30 price swing
- RES 3: $4400.0 - Round number resistance
- RES 2: $4381.5 - High Oct 20 and bull trigger
- RES 1: $4264.7 - 76.4% retracement of the Oct 20 - 28 correction
- PRICE: $4207.0 @ 07:22 GMT Dec 10
- SUP 1: $4155.2/4044.0 - 20- and 50-day EMA values
- SUP 2: $3886.6 - Low Oct 28 and a reversal trigger
- SUP 3: $3800.00 Round number support
- SUP 4: $3760.9 - Low Sep 29
Gold is in consolidation mode. The trend condition is unchanged, the set-up remains bullish. The bear phase between Oct 20 and 28 appears to have been a correction and note that the recovery since Oct 28 signals the end of that corrective cycle. Key support to watch is the 50-day EMA, at $4044.0. Clearance of this EMA would signal scope for a deeper retracement. Sights are on key resistance and the bull trigger at $4381.5, the Oct 20 high.
BRENT TECHS: (G6) Bear Threat Still Present
- RES 4: $70.86 - 76.4% retracement of the Jun 23 - Oct 17 bear leg
- RES 3: $70.33 - High Jul 30
- RES 2: $68.86 - High Sep 26 and a key resistance
- RES 1: $65.25 - High Oct 24
- PRICE: $62.10 @ 07:06 GMT Dec 10
- SUP 1: $59.93 - Low Nov 20 and the bear trigger
- SUP 2: $58.92 - Low May 5
- SUP 3: $58.11 - Low Apr 9 and a key support
- SUP 4: $56.22 - 2.00 proj of the Jul 30 - Aug 13 - Sep 26 price swing
A bear threat in Brent futures remains present - the move down since Oct 24 highlights a bearish theme. A stronger resumption of weakness would expose key support and the bear trigger at $59.93, the Oct 20 low. Clearance of this level would confirm a continuation of the bear cycle. Key short-term resistance to watch has been defined at $65.25, the Oct 24 high. A breach of this level would instead signal scope for a stronger correction.
BOE: VIEW CHANGE: MS raises terminal rate expectation to 3.00%
- Morgan Stanley has raised its BOE terminal rate forecast to 3.00% from 2.75% "as the balance of risks around our 2026 forecasts shifts slightly."
- MS "still expect the BoE to cut in December and February, but now see a skip in March, followed by further action in April and June, as inflation data continue to evolve favourably."
- This is below market pricing (which prices in around 56 bp of cuts from the current 4.00% rate) but it is not hugely inconsistent with other sell side views (14/23 of the analysts we track look for a 3.25% rate or lower with 8/23 looking for 3.00% or lower).
