Futures Trading Market Analysis for January 15, 2012
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The US Dollar has been in an uptrend since August 29th when it hit $73.90. Just yesterday, we had reached a high of $79.40 attributed to the US sluggish growth, the potential Euro Zone default fears and this week’s Fed’s announcement. The US T-Bonds have also benefited by the global uncertainty reaching a high today of $147^00. This clearly confirms that the US Dollar still is the choice currency after the downgrade by Standard & Poor’s from AAA to AA+ and the debt ceiling raise. After all, this is a global economic crisis at this point.
The safe-haven products are typically the Treasuries, US Dollar and the precious metals. In this case, traders had perhaps sold off the precious metals either for fear of market risk or to meet the margin calls for the stock portfolios. Even the stronger economies such as China and Germany have experienced slack growth. It is a matter of a global chain with now many weakened links. - Read More
Twenty-five years ago, Silver had led the Gold Market as far as popularity and demand! To go back further, the Hunt Brothers had given the Silver Market a story line and drama to boost the metal. Today, the Gold is clearly leading the Silver! They are both currency and industrial, but the Silver had been regarded as the poor man’s gold. The metals clearly are tied to the emotion of the market. The uncertainty and anxiety causes the precious metals to advance and the confidence in the global economy leads the investors back into the stocks and stock indices.
The allocations shift according to market sentiment. As of late, we are showing no increase in jobs creation. There are more individuals applying for unemployment insurance and the manufacturing sector had been slack. Federal Chairman Ben Bernanke has stated in his speech that the Federal Reserve will do what it can to boost growth and the employment. Without describing a plan to map out the tools that may be used to pump up a sluggish economy, it left investors disappointed. - Read More
If one thing is certain in our forex markets, it is that they will continue to fluctuate, but the direction of prevailing trends will always be dictated by the market’s interpretation and assessment of numerous economic variables. Some factors obviously carry more weight than others in these minute-by minute valuations, but analysts and investors must go one step further when pricing forex futures by extending their best guesstimates over a subsequent period of time.
The recent pronouncements by Bernanke that QE2 is now concluded and that a QE3 program has a low probability of ever happening will undoubtedly revise our visions for the future for currency markets. Back in April, many of the best currency forecasters opined on the impact of this very topic. Most agreed that there would be little reason for the Dollar to improve. The Fed would maintain its low interest rate posture, as long as inflation was in check, which Bernanke claimed in his recent speech. Based on a survey of more than 70 economists, the Fed is also expected to keep its target rate at 0.25 percent or lower for the balance of 2010. - Read More
Silver has moved sideways this week forming a pennant! While we see that the market could still potentially move lower, it is not likely for it to dip past the $30.00 range. It has separated from the Gold Market as a safe-haven product. The safe-haven products typically are the Treasuries, US Dollar and the Precious Metals during times of uncertainty when investors do not like entertaining the high risk products. In this case, we have the Silver viewed as more of an industrial product! Industrial products will move in sync typically with the global growth. Copper is a market directly tied to industrial growth. Typically, when viewing growth prospects, we view China and the potential building projects within the Asian nation. Reports of factory growth have succumbed to the derailed shipments from Japan with both auto and tech parts. As of late, China has warned its banking and brokerage advisors to caution their clients of the volatility and risk involved with trading Silver. The exchanges that trade Silver have increased the margins to make it difficult for the average investor/trader to include Silver in their portfolios.
Chinese and Indian inflation have also pressured the metal. The stronger US Dollar makes it difficult to purchase the metal. While the Silver has been moving sideways with very little progress, it has also found support at these levels and it has been my experience that a market that one simply cannot bear to watch any longer will suddenly take off. In the case of the Silver Market, we have a potential default in Greece where a bailout resolution cannot be decided upon even with an emergency meeting from the Euro Zone officials. Germany had suggested a potential extension to September in discussing the stabilization. Contagion fears had extended into the banking sector and Portugal/ Ireland/Spain are not far behind. The US has potential concerns regarding their credit ratings dropping from the AAA status. - Read More
Silver had reacted negatively to Federal Chairman Ben Bernanke’s gloom and doom speech yesterday as many of the other markets. The US Dollar Index has been under pressure with all the lackluster economic reports. The Silver Market really has been pressured as an industrial metal reacting to a slowed global growth and possibilities of pauses in manufacturing and production. The weak US Dollar however has led to increased exports and export demand.
The role of the Silver Market is more than just an industrial metal and traders still look to the Silver Market as a safe-haven currency. Certainly, the increased margins have kept traders away from the precious metal, but the margins may be coming down as the volatility subsides. Fitch’s came out with a warning that the possible default of the US in light of the abundant debt, may drop the AAA rating. Foreign investors contribute by allocating to our debt instruments, the appeal of the US is contingent on the financial strength. While many US economic reports lately have been less than perfect, the anticipation for a stronger second half of 2011 lifts the sentiment. - Read More
