Gold Surges to 6-Year High Record
- 12 August 2019
CURRENCY MARKET OBSERVATIONS – 12 Aug 2019
Fundamental Outlook After the U.S. and China trade talk failed in Shanghai on end July, President Trump announced the new tariff on USD300 billion worth of Chinese imports last week. Last week, Chinese Yuan dropped beyond 7.00 level for a Dollar value that is lowest in more than a decade. President Trump has labelled China as currency manipulator but Chinese Government rejects the accusation.
On the other hand, Goldman Sachs expresses it no longer expects a trade deal will be reached before 2020. Former Federal Reserve chief Larry Summers comments the global markets are at the most dangerous point at recession now since 2011, while flight of fund into Gold as safe haven. Meanwhile, he also expects U.K. to slide into recession due to a potential no-deal BREXIT at end October.
While Gold prices surge to above USD1500 /oz at 6-year high, Dow market has dropped 1000 points during intra-week but recoiled to close almost unchanged at 26,287 on Friday.
China’s consumer prices rose 2.8 percent in July on annual basis and above forecast. Another separate report on trade surplus grew RMB310 billion in July and beats consensus.
The British GDP contracted 0.2 percent in Q2 seasons and worst since 2012. Italian Government faces collapse as Deputy Prime Minister has called for election. The current Government of 2-party collation since 2018 encounters conflict and unable to progress further.
Technical Forecast USD/JPY traded lower last week in caution but might tend to fall further. Currently, the trend is resilient at 106.50 level in case of recovery. Downside is prone to test 104.50 support but sinking beneath this level will open more leeway to dip at lower grounds.
EUR/USD rose in mild sentiment last week while Dollar began to recede. This week, we forecast the support will lie strong at 1.1100 but market trend might climb further. On piercing above 1.1250 level, the bulls will ascend to 1.1400 as our next target should Dollar correct further.
GBP/USD has been under the sheer pressure of BREXIT that is less than 100 days away. Pound keeps devalue as market traders wane confidence in the leadership of new Prime Minister Johnson. This week, we foresee the range will be tightly contained from 1.2000 – 1.2150 region but breaking beneath the support will break loose to a wave of new selling activity till 1.1800 area.
Gold prices have become the safe haven from fear of regional trade war conflicts. Market trend has reached USD1500 /oz and settled slightly below this benchmark on Friday. This week, we foresee mixed sentiment in market due to some profit-taking activities may occur. Overall range is contained from USD1475 – USD1525 /oz region while prone to correction.
WTI Crude prices have made recovery last week. Moving forward, we forecast some new demand will begin to enter market as Gold prices correct. This week, we reckon the trend will trade from USD53 – USD56 /barrel and prone to build up more buying interest. In technical aspect, the weakening Dollar is a good sign to help recovery in Crude prices.
Silver prices surged last week after broke above the USD16.60 /oz resistance. This week, we expect the Silver to climb higher while Gold prices may stall. The overall range is expected to trade from USD16.60 - USD17.40 /oz with another week of rising trend. Precious metals among Gold and Silver will move alternate momentum as Dollar falls.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in strong uptrend last week as the market reached 3-month high. October19 Futures closed at RM2176 /MT on Friday. This week, the trend may rise further to test RM2220 /MT before profit-taking occurs. Trend activity is expected to contain from RM2140 – RM2220 /MT with some mixed trading towards end of the week.
DAR Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely at his own. He can be reached at firstname.lastname@example.org