Live on Bloomberg TV

00:00Start with the goal here. Right now we've been seeing the hedge funds in particular kind of trimming their long positions when it comes to gold. Why is it losing a lot of its fury here now . I mean we've reached the top of this rally. Well I don't think we have reached the top of the rally but we also need to recognize that you know first of all price of rally quite a fair bit. That's number one. And if you look at speculative positions particularly on the future side those will have really increased dramatically. And so that kind of increase tells you a lot of investors already position. But I think any pullback in gold is actually a buying opportunity from here. So you're still sticking to this forecast here. Sixteen hundred or so when it comes to gold. I would say towards the end of the year we're looking at 15 50. And then in 2020 we're looking at 1650 . And I think there are two reasons. Yes. Short term obviously gold takes all the guidance from the trade talks. And on our expectation is that still is a good chance that we're not going to get any grand deal and some of the tariffs still ratchet up and the CNY might weaken and the uncertainty spikes one more time in here. I think all will do its job but I think more importantly into 2020 as well. We expect the Fed to cut several times and so real rates in negative territory. Why would you not own gold particularly as an equity investor and investors here in the region. Gold adds extremely favorably in portfolio context . So Dominic it's Juliet here in Singapore as you say the effects of the trade war potential negative real rates all the reason to hold gold. Just touching on what you said though about the trade talks. Of course we're gearing up for these talks in Washington. Is it likely we are going to see some kind of positive news coming through here particularly as Bloomberg has been reporting. China seems to want to narrow the scope of the deal . I think if you look at the equity market which reacted quite positively on some kind of sign that might be a broader understanding between the US and China towards the end of August and into into September. I mean a lot of pullback already. So clearly if we have any kind of intermediary deal where you know the indication is yes we buy a little bit more soybeans we relax things on Huawei. And this is the beginning of a broader talk . So really we start to see a little bit of a framework that things could go better from here. And I think in that kind of environment the market could take that quite positively. But if it's just OK we're going to buy a little bit more soybean. We change things. And yeah look tariff is still going to reach higher. I think in that kind of environment the market is going to be more cautious and might sell off. So from our perspective into these kind of environment we want to be underweight in terms of the equities particularly on the emerging market side . And we do look for some carry trade position that actually can weather the situation quite effectively. So on our perspective there is obviously two outcomes. We are more defensively position . So underweight equities you prefer U.S. stocks you mentioned that as well. Let's talk about some of the other commodities that you cover because we've seen a lot of these concerns about geopolitical tensions way into the oil market as well. At what price level do you add exposure to oil . From our perspective short term we still quite constructive. I mean we lost quite a fair bit of barrels. One point four million barrels. If you believe the latest numbers from August into September. So the market is reasonably tight in the short term but I think the two thousand twenties is a bigger problem . Demand is going to grow maybe a million barrels per day a little bit more. But the supply side particularly outside OPEC can still grow at a staggering one point six to one point eight million barrels. And so the market goes into a surplus. So I want to see prices going down at least five dollars per barrel before I look into it. I think once we get that kind of adjustment I think the first step would be to sell volatility. Vol in oil is still quite attractive. And I think once you get to live at lower price levels on the spot side of the curve still somehow in the in backwardation I think vol selling becomes the first investment objective that I would look into. And then later on if I get a little bit confirmation of the global economy is not continue to sink. Think about I mean investment is already on its knees. And the big question is for 2020 will consumption step down more broadly. And I think we still not have a lot of clarity on that side. So I still want to wait a little bit before I add I would say a Delta one position. What about the geopolitical risk surrounding and possibly another attack in the Middle East. Do you think that's being priced out of the market now. Is that the right move. I think it's quite amazing if you think about it. We lost so much supply in the market barely reacted. I mean first of all it tells you a little bit that obviously the market doesn't really care anymore about Saudi Arabia being the swing producer. We lost probably an additional spare capacity of course. I mean it's now one point five million barrels. Probably. They're. That's a very very low . What were the expectations that the U.S. might add. Zero point eight to a million in crude additional supply next year per day . And then you have all the NGLs on top of it. Then we have Europe a little bit more Brazil. So all that kind of mix of incremental supply tells us it's really the forward looking element that seems to govern at the moment the price. And the other element is we still have ample inventories. So we do have strategic reserves to point nine billion barrels actually in OECD in crude. And I think that gives a lot of comfort to the firm vis .

No schedule data available.

Any Pullback in Gold Is a Buying Opportunity, Says UBS’s Schnider

Dominic Schnider, head of commodities and APAC macro, rates and FX at UBS Global Wealth Management CIO office, discusses his outlook for gold, equities and oil. He speaks on “Bloomberg Markets: Asia.” (Source: Bloomberg)

More From Bloomberg Markets
All episodes and clips