Precious metals remain in focus, with all rising strongly and Gold and Silver breaking to new all-time high prices.
- Eyes are on precious metals today as this asset class continues roaring ahead:
- Gold is trading more than $50 higher to reach new record highs above $4,400.
- Silver continues to make huge gains, and is now in sight of an incredible $70 per ounce.
- Platinum has made excessive rises to well above $2,000 and is not very far from its record high of 2008.
- Palladium has gained firmly to reach a new long-term high price.
- Trend traders will want to be long of these precious metals. However, it is wise to respect the very high volatility here, especially in Silver, and trade with relatively small position sizes. Do not be surprised if the strong advance suddenly collapses, and following that, the prices may or may not come back strongly.There are supply issues with Silver, and as advanced economies move towards lower interest rates, that tends to boost the prices of precious metals. But these huge rises cannot be explained fundamentally. It may be institutional investors piling in to try or be seen to try to cash in on these rises - a kind of "Santa Claus" rally in precious metals instead of stocks.
- The Japanese Yen has been in the news over the past few days following the Bank of Japan's widely expected rate hike last Friday. It was a very dovish hike, because the Bank made clear that it would only hike insofar as negative real rates were maintained (ie. The interest rate will always be below the rate of inflation). This practically guarantees a fundamental case for Yen deprecitation, so after this was made clear, the Yen fell quite dramatically. This week opened with the Yen remaining weak, but the Japanese Government's top FX official Mimura threatened intervention a few hours ago to prop up the Yen, which seems to have give the Yen enough strength to halt the slide, at least for the time being. Nevertheless, there is a good case to be short of the Yen, and trend traders will be short of it, probably by being long USD/JPY.
- In the Forex market, since today's Tokyo open, the strongest major currency has been the Australian Dollar, and the weakest has been the US Dollar, putting the AUD/USD currency pair in focus. The USD/ZAR currency pair remains very close to its 3-year low, and this might be attractive to carry traders looking to benefit from the 6% interest rate South Africa offers.
- There are no high-impact data releases scheduled for today, so it may be relatively quiet in the markets, with the exception of precious metals.