Over the past week, both gold and crude oil prices have shown a rising momentum as analyzed in Royal Capital. The main reasons for the rebound in gold prices are as follows: Firstly, the market hyped up the improvement of the employment data during that week, which strengthened the market's expectation that the Federal Reserve would maintain interest rate cuts in the future. This reduced the opportunity cost of holding gold and increased investors' demand for gold. Secondly, since the beginning of the year, some active funds have been continuously buying gold. Meanwhile, central banks around the world, including the People's Bank of China, have also been continuously increasing their gold holdings, providing strong support for gold prices. Thirdly, the geopolitical tensions remain unresolved, and investors' demand for hedging has increased the attractiveness of gold as a safe-haven asset.
In terms of crude oil, Europe, the UK, and the US have recently been hit by snowstorms and severe weather, and the cold weather has affected local life. If this situation continues, it is expected to support oil prices. In addition, the environmental protection policy announced by the Biden administration this week prohibits the exploitation of natural gas and energy along the US coast. Since the undeveloped natural gas and energy in the US are mainly concentrated in the Gulf region, this bill has put certain pressure on the US's future production increase. In the past two or three months, the decline in oil prices was mainly due to Trump's proposal to significantly increase the production of natural gas and energy after being elected president and his requirement for countries such as Europe and Japan to further purchase US energy. Now, if the US cannot significantly increase production, the market's concern about the oversupply of crude oil will be alleviated. Meanwhile, according to the opinions of US legal experts, the bill of the Biden administration was introduced through a strict government process, and it is rather difficult to cancel it in the short term. Therefore, under the circumstances of the cold snap and the uncertainty of the US's future production, there is a chance for oil prices to rise further. The market is currently also quite concerned about whether Trump can overturn this decree of the Biden administration after taking office.
Moreover, the impact of the wildfires in Los Angeles on the US economy is still being evaluated. However, if nothing unexpected happens, it will be a heavy blow and may cause many insurance companies to suffer serious losses. It is still uncertain whether such economic losses will lead to the breakage of the capital chain. Usually, such events will gradually ferment in the market. Given the extremely destructive nature of this incident, it is necessary to continuously pay attention to whether it will bring risks to the financial market. If risks emerge, the risk-averse sentiment in the stock market will likely increase, and US stocks may decline further. Looking ahead to next week, the cold snap, the Biden administration's environmental protection policy, and the US wildfires mentioned above are all worthy of close attention.
The US inflation data is expected to rise to 2.9%.
In the new week, pay attention to how the results of the non-farm payroll data will affect the market sentiment. Whether it reflects the continuous weakening or the strong momentum of the US employment market will affect the capital sentiment. More importantly, the market will focus on the US inflation situation. The latest US inflation data will be released next week, and the market predicts that the data will rise from 2.7% to 2.9%, indicating that the US inflation problem continues to rise. Recently, when Yellen was interviewed by the media, she admitted that the US inflation problem was related to the Biden administration's relief package. This may make the market more worried that Trump will introduce more stimulus policies after taking office, which will lead to the US inflation remaining at a high level, keeping interest rates high, and even causing the Federal Reserve to shift from the current interest rate cutting cycle to an interest rate hiking cycle. If the US inflation data rises, it will indeed put certain pressure on gold prices in the short term. However, from a long-term perspective, the impact of next week's inflation data may not be significant. After all, the market pays more attention to the global impact after Trump takes office.
Welcoming the market trend after Trump takes office: Is there a chance of "buying the rumor and selling the fact"?
Trump will take office on January 20th, and next week is the last trading week before he takes office. The market will re-evaluate the impact after he takes office. Previously, the market expected that Trump would adopt stimulus policies such as tax cuts, increasing tariff policies, and relaxing the market after taking office. Overall, these policies may push up inflation, strengthen the US dollar, and suppress non-US assets. However, whether there will be a contrast between expectations and reality in the end depends on Trump's actual actions. If his actual actions fail to meet the expected effects, the US dollar may face downward pressure, and the decline of the US dollar is beneficial to gold.
Pay attention to the market trend caused by the policy differences between the Federal Reserve and non-US central banks.
Moreover, many central bank officials will give speeches next week. Not only the officials of the Federal Reserve, but also the officials of central banks in countries such as Europe and the UK are extremely important. If the policy expectations of non-US central banks change from dovish to hawkish, while the Federal Reserve turns dovish next week, there will be a situation of policy expectation differences among central banks, leading to a weakening of the US dollar and being beneficial to gold prices. On the contrary, if the Federal Reserve is hawkish next week while non-US central banks are dovkish, the US dollar may further strengthen and bring certain pressure on gold prices.
The Spring Festival trend may support China's stock index and gold.
Overall, the Spring Festival trend in China is approaching. The market expects that the power of China's gold purchases will increase, and more important economic data of China will be released next week. If these data reflect that China's economy is gradually stabilizing, it is expected that more funds will flow into China's stock market and other fields, which will also affect the capital flow and asset price performance in the global financial market to a certain extent.
By Wayne Lai
A senior financial practitioner in Hong Kong. He has served well-known financial public relations firms, financial media, and investment banks. Past service targets include Societe Generale, CMC Markets, KVB Kunlun, etc. At the same time, he is a part-time lecturer at colleges and universities, a regular guest of financial media, and an author of financial readings. He has represented Hong Kong to attend world financial forums many times. Currently, he is the research and marketing director of Royal Capital. Over the years, he has won multiple industry awards for service institutions.
Disclaimer: The content of this article is for reference only and does not constitute an offer, recommendation, or inducement for any person to submit an offer to buy or subscribe for any securities. The price of structured products can rise or fall sharply, and investors may suffer total losses. Past performance does not reflect future performance. Before investing, investors should understand the risks and consult professional advisors and refer to relevant listing documents. Nothing in this article constitutes investment, legal, accounting or tax advice, and there is no statement that any investment or strategy is suitable or in line with your individual circumstances.
In terms of crude oil, Europe, the UK, and the US have recently been hit by snowstorms and severe weather, and the cold weather has affected local life. If this situation continues, it is expected to support oil prices. In addition, the environmental protection policy announced by the Biden administration this week prohibits the exploitation of natural gas and energy along the US coast. Since the undeveloped natural gas and energy in the US are mainly concentrated in the Gulf region, this bill has put certain pressure on the US's future production increase. In the past two or three months, the decline in oil prices was mainly due to Trump's proposal to significantly increase the production of natural gas and energy after being elected president and his requirement for countries such as Europe and Japan to further purchase US energy. Now, if the US cannot significantly increase production, the market's concern about the oversupply of crude oil will be alleviated. Meanwhile, according to the opinions of US legal experts, the bill of the Biden administration was introduced through a strict government process, and it is rather difficult to cancel it in the short term. Therefore, under the circumstances of the cold snap and the uncertainty of the US's future production, there is a chance for oil prices to rise further. The market is currently also quite concerned about whether Trump can overturn this decree of the Biden administration after taking office.
Moreover, the impact of the wildfires in Los Angeles on the US economy is still being evaluated. However, if nothing unexpected happens, it will be a heavy blow and may cause many insurance companies to suffer serious losses. It is still uncertain whether such economic losses will lead to the breakage of the capital chain. Usually, such events will gradually ferment in the market. Given the extremely destructive nature of this incident, it is necessary to continuously pay attention to whether it will bring risks to the financial market. If risks emerge, the risk-averse sentiment in the stock market will likely increase, and US stocks may decline further. Looking ahead to next week, the cold snap, the Biden administration's environmental protection policy, and the US wildfires mentioned above are all worthy of close attention.
The US inflation data is expected to rise to 2.9%.
In the new week, pay attention to how the results of the non-farm payroll data will affect the market sentiment. Whether it reflects the continuous weakening or the strong momentum of the US employment market will affect the capital sentiment. More importantly, the market will focus on the US inflation situation. The latest US inflation data will be released next week, and the market predicts that the data will rise from 2.7% to 2.9%, indicating that the US inflation problem continues to rise. Recently, when Yellen was interviewed by the media, she admitted that the US inflation problem was related to the Biden administration's relief package. This may make the market more worried that Trump will introduce more stimulus policies after taking office, which will lead to the US inflation remaining at a high level, keeping interest rates high, and even causing the Federal Reserve to shift from the current interest rate cutting cycle to an interest rate hiking cycle. If the US inflation data rises, it will indeed put certain pressure on gold prices in the short term. However, from a long-term perspective, the impact of next week's inflation data may not be significant. After all, the market pays more attention to the global impact after Trump takes office.
Welcoming the market trend after Trump takes office: Is there a chance of "buying the rumor and selling the fact"?
Trump will take office on January 20th, and next week is the last trading week before he takes office. The market will re-evaluate the impact after he takes office. Previously, the market expected that Trump would adopt stimulus policies such as tax cuts, increasing tariff policies, and relaxing the market after taking office. Overall, these policies may push up inflation, strengthen the US dollar, and suppress non-US assets. However, whether there will be a contrast between expectations and reality in the end depends on Trump's actual actions. If his actual actions fail to meet the expected effects, the US dollar may face downward pressure, and the decline of the US dollar is beneficial to gold.
Pay attention to the market trend caused by the policy differences between the Federal Reserve and non-US central banks.
Moreover, many central bank officials will give speeches next week. Not only the officials of the Federal Reserve, but also the officials of central banks in countries such as Europe and the UK are extremely important. If the policy expectations of non-US central banks change from dovish to hawkish, while the Federal Reserve turns dovish next week, there will be a situation of policy expectation differences among central banks, leading to a weakening of the US dollar and being beneficial to gold prices. On the contrary, if the Federal Reserve is hawkish next week while non-US central banks are dovkish, the US dollar may further strengthen and bring certain pressure on gold prices.
The Spring Festival trend may support China's stock index and gold.
Overall, the Spring Festival trend in China is approaching. The market expects that the power of China's gold purchases will increase, and more important economic data of China will be released next week. If these data reflect that China's economy is gradually stabilizing, it is expected that more funds will flow into China's stock market and other fields, which will also affect the capital flow and asset price performance in the global financial market to a certain extent.
By Wayne Lai
A senior financial practitioner in Hong Kong. He has served well-known financial public relations firms, financial media, and investment banks. Past service targets include Societe Generale, CMC Markets, KVB Kunlun, etc. At the same time, he is a part-time lecturer at colleges and universities, a regular guest of financial media, and an author of financial readings. He has represented Hong Kong to attend world financial forums many times. Currently, he is the research and marketing director of Royal Capital. Over the years, he has won multiple industry awards for service institutions.
Disclaimer: The content of this article is for reference only and does not constitute an offer, recommendation, or inducement for any person to submit an offer to buy or subscribe for any securities. The price of structured products can rise or fall sharply, and investors may suffer total losses. Past performance does not reflect future performance. Before investing, investors should understand the risks and consult professional advisors and refer to relevant listing documents. Nothing in this article constitutes investment, legal, accounting or tax advice, and there is no statement that any investment or strategy is suitable or in line with your individual circumstances.
