Wednesday, December 2

Precious metals fall as Dow surges

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Fundamental outlook

THE Dow benchmark closed 834 points higher on the first market day of the week after Joe Biden won the presidential electoral vote. Aside from that, Pfizer and BioNtech claimed their vaccines on treating the Coronavirus Disease 2019 (Covid-19) are more than 90 per cent effective based on their trial results.

Gold and silver prices fell last week as the stock market gained. Gold prices submerged below US$1,900 per ounce.

US weekly claims for jobless benefits declined slightly at 751,000 for November 7.

The European Central Bank official said the current pandemic-induced recession is very different from the past. The whole European region’s sentiments remain volatile due to the widespread resurgence of the Covid-19 outbreak. ECB’s president Christine Lagarde said a large number of people has lost their jobs since spring and have now given up on seeking new employment. Policymakers are prepared to roll out more stimulus to fight the economic slowdown over the year-end.

The OPEC will meet the non-allies at the end of this month to discuss production cuts. The current production is reduced by an estimated 9.8 million barrels per day, on a year-on-year basis.

Technical forecast

US dollar/Japanese yen pulled up but traded below 105.70 last week. The trend would likely consolidate from 104 to 106 this week before finding new headway. The dollar strength will play an important role in leading the US dollar-yen direction in the coming weeks.

Euro/US dollar traded from 1.175 to 1.19 last week. We foresee the trend could remain until it steps out beyond the extreme levels of 1.17 support and 1.19 resistance. Traders are reminded to remain cautious in case of unexpected market movements.

British pound/US dollar moved into uncertain territory while awaiting catalysts to lead its trend. The trend might continue to swing sideways from 1.31 to 1.34. The market is rather high and strongly resisted. However, we presume the bears need to break beneath 1.30 benchmark in order initiate a new selling trend.

WTI Crude prices hit the US$43 per barrel topside before settling at US$40 per barrel on Friday. We predict the range could trade sideways again from US$37 to US$43 per barrel. The market has not shown any directional headway for the past few months.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives continued to rise ahead of the Deepavali festival. The market might roll over to February month this week and we expect some corrections. January Futures contract settled at RM3,389 per metric tonne on Friday. We expect the trend to take a breather and consolidate from RM3,300 to RM3,400 per metric tonne in mixed trading.

Gold prices exhibited strong support at US$1,850 per ounce after the market fell on Monday last week. We expect the market movement to trade from US$1,850 to US$1,900 per ounce in mixed trading. As market investors’ attention are on the rising Dow index, the demand for gold could slow down. Beware of an unexpected fall beneath US$1,850 per ounce.

Silver prices traded sideways after falling on Monday last week. The trend could face strong resistance at US$25 per ounce in case of a recovery. We foresee the overall trend will be contained from US$23.50 to US$25 per ounce range for the time being. Mixed trading is expected.

Dar Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely his own. He can be reached at [email protected]