One beneficiary of the economic gloom recently has been precious metals.
Money managers increased their net-long position in gold, silver, platinum and palladium for a third straight week, helping to fuel rallies for the metals amid signs of a weak US labour market.
The price gains last week pared losses for 2015 on mounting expectations that sluggish growth will force the Federal Reserve to hold off on raising interest rates, which can curb the appeal of assets like commodities that don’t pay interest. More than USD8 billion was wiped from the value of exchange-traded funds backed by precious metals this year through September, and prices as recently as this month were at six-year lows, partly because the Fed was indicating higher borrowing costs were imminent.
However, more investors expect the central bank to push the increase back into next year. Data from Fed fund futures last week show that the probability of the Federal Reserve hiking rates is less than 50% until the meeting in March 2016.
Gold futures for December delivery rose 1.7 percent last week, and traded little changed on Monday at USD1,155.70 an ounce, while silver climbed 3.6 percent last week, capping the first consecutive increase since August. Platinum surged 7.9 percent last week, the most since October 2011, while palladium added 1.5 percent for a fifth straight weekly gain, the longest rally since July 2014.
Combined net-long positions in gold, silver, platinum and palladium increased 38 percent to 95,104 futures and options contracts in the week ended 6th October, according to data from the US Commodity Futures Trading Commission (CFTC). Bullish wagers in silver climbed the most since May, while short holdings in palladium dropped 32 percent, the biggest decline since December.
Signs of slowing global growth can be seen from the recent dismal figures in US payrolls and manufacturing activity across Germany and China. Minutes from the Fed’s September meeting released last Thursday showed policy makers highlighting risks from the slowdown in China and its potential spillover to other economies, which “were likely to depress US net exports.”
Brent crude, a global pricing benchmark, slipped 8.2 percent this year and tumbled 41 percent in the last 12 months. The contract closed Friday at USD52.65 a barrel in London. The Organisation of Petroleum Exporting Countries (OPEC), led by Saudi Arabia and other Gulf Arab producers, have kept the group’s production target unchanged to maintain market share amid growing output from non-OPEC producers.
The market remains oversupplied and stocks are above their 5-year average while the current world crude output is at 75 million barrels a day. Prices will remain muted because of oversupply and low global demand.
Top News This Week
China: CPI y/y. Wednesday 14th October, 9.30am.
I expect figures to come in at 1.8% (previous figure was 2.0%).
USA: Core Retail Sales m/m. Wednesday 14th October, 8.30pm.
I expect figures to come in at -0.1% (previous figure was 0.1%).
NZ: CPI q/q. Friday 16th October, 5.45am.
I expect figures to come in at 0.2% (previous figure was 0.4%).
Short USD/CAD at 1.2904
On the H1 chart, USD/CAD has been on a continuous downtrend, primarily due to weakness in both the US dollar and crude oil prices. USD/CAD has dropped a massive 500 pips over the last 2 weeks, but I do expect the downtrend to continue. We will go short once prices drop to 1.2904 and a stop loss of 100 pips is placed above the last high. We will have two targets on this trade, exiting the first position at 1.2804 and the second one at 1.2704.
Entry Price = 1.2904
Stop Loss = 1.3004
1st Profit = 1.2804
2nd Profit = 1.2704