Driven by the escalating tensions in Venezuela and market expectations of further interest rate cuts in the United States, the price of gold soared to a record high above $4,500 per ounce. The prices of silver and platinum also reached all-time highs.
Spot gold prices rose nearly 1%, extending a three-day winning streak. Tensions over the US seizure of a Venezuelan oil tanker have increased the appeal of gold as a safe-haven asset. Traders also bet that the Federal Reserve will cut borrowing costs again next year after three consecutive rate cuts, which would benefit non-yielding precious metals.
Since the beginning of this year, the price of gold has risen by more than 70%, and the price of silver has soared by 150%. Both are expected to achieve their best annual performance since 1979. The increase in precious metal prices is mainly attributed to the increased gold purchases by central banks around the world and the inflow of funds into exchange-traded funds (ETFs). Data from the World Gold Council shows that the total holdings of gold ETFs have increased every month this year except May.
US President Donald Trump’s radical moves to reshape global trade and his threats to the independence of the Federal Reserve fanned the flames of the bull market earlier this year. Investors were also partly spurred by so-called “depreciation trades” – selling off sovereign bonds and their currencies amid concerns that ballooning debt levels would cause their value to erode over time.
John Fenni, business development manager of Sydney-based precious metals trader Guardian Vaults, said, “The main drivers of gold and silver prices at present are the sustained physical demand and the renewed focus on macro risks. What we are seeing is that the upward momentum of prices is strengthening rather than being restricted, which indicates a fundamental confidence in the market rather than a pure speculative bubble.”
Heavy buying of ETFs has also been a major driver of the recent surge in gold prices. The holdings of the SPDR Gold Trust, the world’s largest precious metals ETF, have risen by more than one-fifth this year. Traders are also closely watching the developments in Venezuela. Trump warned Venezuelan President Nicolas Maduro not to challenge the United States and vowed to seize the oil seized from a super tanker.
Feni said, “Unlike previous silver rallies mainly driven by leverage, this one is supported by genuine market demand for the metal, which is changing the market’s behavior near key price levels. I don’t see an end to this upward trend yet.”
Technical analysis:
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Gold: Yesterday’s operation of breaking through and buying at the blue line in our plugin was able to win a favorable risk-reward ratio. This morning in the Asian market, the price quickly dropped from above 4500, swept through the liquidity near 4480, and is now starting to rebound. Subsequently, it is advisable to wait for a pullback to buy after the gap between 4500 and 4510 is recovered. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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Nasdaq: The price broke through the 25,550 level, but there was no entry on the pullback. A new demand zone was established near 25,450 overnight. Pay attention to whether there is an opportunity to pull back and hit the buy limit within the day. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The operation of breaking through the buy stop in the blue area we provided through the plugin yesterday can yield a favorable risk-reward ratio. However, within the day, we still need to pay attention to the signal for buying on a pullback. The main observation area remains 58.10 – 57.80. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Today’s key financial data and events to focus on:
21:30 U.S. Seasonally Adjusted Initial Jobless Claims (in thousands) (to 12/20)
