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Market Overview

Geopolitical Sabre-Rattling Sends Gold to Two-Month Highs

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Gold prices rode a tailwind of “fire and fury” Wednesday on route to two-month highs, as North Korea tensions triggered a bout of risk aversion in the financial markets.

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Precious Metals Surge

Risk avoidance sent gold prices sharply higher in mid-week trading. The December futures contract closed a hair below $1,280.00 a troy ounce on the Comex division of the New York Mercantile Exchange before extending gains during Asian trade. Prices touched a session high of $1,284.20 a troy ounce Thursday.

Bullion has gained nearly 1.5% this week, with the bulk of the buying occurring on Wednesday. Though presenting a solid technical picture, gold remains highly vulnerable to correction once investors move past the latest geopolitical gripe. The yellow metal has failed to take the $1,300.00 level several times this year, with each failed attempt triggering a sharp reversal.

Silver also spiked on Wednesday, with the September futures contract closing at $16.86 a troy ounce. Prices were little changed overnight as markets consolidated gains.

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The Threat of Nuclear Winter Spooks Investors

Geopolitical tensions have reached a boiling point on the Korean peninsula, with U.S. President Donald Trump vowing blitzkrieg over the North following a series of highly provocative missile tests. Earlier this week, the United States along with the United Nations imposed new sanctions on the hermit state. Pyongyang’s official KCNA news agency threatened the U.S. with “thousands-fold” revenge for the latest tactics.

Tensions concerning North Korea’s nuclear ambitions have helped push up gold prices more than 10% this year. The precious metal’s demand as a safe-haven will only escalate should the Trump administration seek new measures to strangle Pyongyang’s communist regime.

Gold’s appreciation has come at the expense of global equities, with markets from New York to Tokyo feeling the drag. Asian markets were down across the board Thursday morning. U.S. and European equity futures also traded lower.

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Market Overview

Dow Jones Hits New Record After Brief Stint at 23,000

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The Dow Jones Industrial Average rose to New records Tuesday, powered by stronger than expected earnings for major health blue chips.

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Dow Touches 23,000 In Intraday Trade

The blue-chip index briefly traded above 23,000 before paring gains to settle a mere three points shy of the milestone. The index rose 0.2% to 22,997.44 for a new all-time record.

Sixteen of the Dow’s 30 index members contributed to the rally. UnitedHealth Group (UNH) and Johnson & Johnson were the best performers after each reported earnings that beat forecasts.

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On the opposite side of the ledger, Goldman Sachs (GS) shed 2.6% despite posting better than expected Q3 results.

With the gain, the Dow has now finished in positive territory in 12 of the past 15 sessions. Over that period, it has added 3.2%.

The broader S&P 500 Index also climbed to new highs Tuesday, adding 0.1% to finish at 2,559.36. Health stocks led the gains, climbing 1.3% as a sector.

Meanwhile, the tech-driven Nasdaq Composite Index pared losses to settle flat at 6,623.66.

However, the gains on Tuesday were accompanied by a mild increase in volatility, with the CBOE VIX settling in the double digits for the first time in a week.

Economic Data Largely Positive

The latest batches of industrial production and housing data painted a favorable picture of the U.S. economy. Industrial production – the broadest measure of factory output – rose 0.3% in September, the Federal Reserve reported Tuesday. Analysts had forecast an increase of 0.2%.

A closely watched measure of housing market conditions also strengthened more than expected this month. The National Association of Home Builders’ housing market index climbed four points to 68 for October. That was the highest level in five months.

Upbeat data helped the U.S. dollar notched its fourth consecutive gain on Tuesday. The U.S. dollar index (DXY) climbed 0.2% to 93.51.

The dollar strengthened against the pound and euro, while paring gains versus the yen and loonie.

Featured image courtesy of Shutterstock.

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Analysis

Daily Analysis: Dollar Rally Continues amid Fed Chair Confusion

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Tuesday Market Recap

Asset Current Value Daily Change
S&P 500 2554 -0.09%
DAX 12995 -0.07%
WTI Crude Oil 51.53 -0.66%
GOLD 1287.00 -1.22%
Bitcoin 5652 -0.86%
EUR/USD 1.1751 -0.38%

Yesterday’s trends are mostly continued in financial markets, such as the low-volatility levitation in stocks and the slightly more active trading in currencies with the apparent Dollar strength. The Great British Pound continued to be under pressure amid the amplified Brexit-related worries, but most of the other majors also lost ground to the Greenback.

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The Dollar rally has been fueled by the rise in the odds of some of the hawkish Fed Chair candidates, while overall, the “race” for the positions looks more chaotic than ever. Interestingly, the long-end of the yield curve is refusing to follow the short-term moves, and without the effects of the Fed’s QE program, the yield curve would probably be inverted by now, signaling strong recession risks.

Dollar Index (DXY), 4-Hour Chart Analysis

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The major stock indices are virtually unchanged yet again and even the previously surging Nikkei entered a consolidation, adding to the unusual October lull. Commodities have been quite active thanks to the Dollar’s vigor, with crude oil and gold both turning lower. Oil gave back most of yesterday’s gains as the Iraqi-Kurdish conflict turned out to be less violent than previously feared, and the brief rally fizzled.

WTI Crude Oil, 4-Hour Chart Analysis

Cryptocurrencies

The major coins are having a mixed session at best, as yesterday’s rebound wasn’t durable, and most of the coins turned back lower again. That said, despite the recent choppy price action, the total market cap of the segment is close to its all-time high, even as only Bitcoin is trading near its own record price level.

The optimism regarding Ethereum major Byzantium upgrade wasn’t enough to lift the second most valuable coin today, and the price of the ETH token retreated below the key $330 level after touching $350 yesterday after the upgrade’s lock-in. Ripple and NEO have been among the most active majors today, but with opposing performances, as Ripple fell significantly after yesterday’s break-out attempt, while NEO defied gravity and jumped above the $30 level after a corrective period.

BTC/USD, 4-Hour Chart Analysis

Technical Picture

The S&P 500 is grinding higher despite the overbought short-term momentum readings, and the benchmark is trading very close to its all-time high. The 2550 level is still in focus, but until volatility remains near record lows, the minuscule moves are unlikely to change the technical setup. While a sudden drop in prices could quickly negate the recent break-out, the consolidation could very well lead to further upside, as bulls remain firmly in control, despite the lofty valuation levels.

S&P 500 Futures, 4-Hour Chart Analysis

Key Economic Releases on Tuesday

Time, CET Country Release Actual Expected Previous
02:30 AUSTRALIA RBA Meeting Minutes
10:30 UK CPI 3.00% 3.00% 2.90%
11:00 GERMANY ZEW Sentiment 17.6 20.3 17
12:00 EUROZONE Final CPI 1.50% 1.50% 1.50%
15:15 US Industrial Production 0.30% 0.40% 0.20%
15:15 US Capacity Utilization Rate 76.00% 76.20% 76.10%

Featured image from Shutterstock

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Cryptocurrencies

Gold Creating Kilonova

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For the first time ever astronomers around the world were treated to an astonishing event in outer space called a Kilonova.

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Two dead stars known as neutron crashed into each other at high speed. The stars were relatively small (just about 12 miles in diameter) but extremely dense. Some scientists estimate that a single teaspoon of the star’s substance would weigh a billion tons on Earth.

The outcome of the collision was the creation of copious amounts of metals that are extremely rare here on earth like Gold and Platinum. The sight is being hailed as one of the biggest advances in astrophysics and even answers the age old question “where does gold come from?”

Some Bitcoin extremists on the web were quick to point out that gold may not possess as much rarity as it used to and therefore is no longer the best store of value as it was throughout history.

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However, the Kilonova did take place approximately 130 million light-years away. So until we invent interstellar travel gold’s status as a backup monetary system and safe haven remains solid.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of October 17th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

Stocks are generally positive today as the global equity bubble reaches ever higher. As we’ve mentioned most analysts feel that stocks are expensive but that this overvaluation may continue for up to two years.

The US Dollar is also making a move of strength lately and is up sharply against its peers over the last 30 days.

Over the long term though, this move in the Dollar is simply a bounce against a larger downward trend that’s been happening since Donald Trump took office.

Of course, Trump’s weakening of the Dollar could also be seen as a small reversal from the upward trend that’s been forming over the past decade.

Today’s Event

The highlight today will most likely be a speech from the Bank of England Governor Mark Carney, who will be testifying before the Treasury Select Committee in London.

Traders want to know if indeed Mark will be raising the English Interest rates at their meeting next month. Currently the market is placing an 83% chance of a hike on November 2nd.

Furthermore, if indeed the rates are raised, investors want to understand the future path of monetary policy in the UK. Will this hike be a “one and done” or are we on the path to further hikes going forward?

In the wake of the referendum, the BoE cut interest rates near zero to try and cushion the Brexit blow. Now that it’s clear that the blow is less than expected many economists feel that it’s time to reverse that move.

The GBPUSD is strengthening this morning in anticipation but if Carney does indeed want to sustain these moves, he’s gonna need to be a bit more aggressive than he’s been to date.

Ripple Short

Ripple’s first annual Swell conference is well underway. No doubt everyone there is very excited about the recent announcement from the Gates Foundation that they will be using Ripple’s technology in their new efforts to open the world of banking to billions of people.

Just before the conference started though there was another unrelated announcement that could affect the price as well. The tech giant IBM has just made public their new Hyperledger Blockchain with the goal of speeding up international interbank transactions.

This sounds extremely similar to Ripple’s goal, which is to “replace the Swift system that banks currently use to send funds.”

Now, I’m no bank manager but I do believe that most big banks would be quicker to work with an established company like IBM than with even the most successful startup.

As far as the technical analysis of Ripple’s XRP token goes, we are just near the top of a huge price range from 15 cents to 30 cents.

On top of all that, the topmost copied Cryptotrader in eToro has just announced on his wall that he’s going for a big short sell with the anticipation of a price drop.


Of course, short sell trading is risky and cryptotrading is even more risky. So as always please be sure to diversify your investments and build a proper portfolio.

Let me know if you need any help with that. Today I’ll be holding a webinar to discuss the markets and portfolio positioning with our top equity clients. If you are one of them, feel free to join in at: etoro.tw/Webinar

Let’s have an amazing day!!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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