This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Unlike the S&P500, Asian markets have not regained the sell-off from a couple of months ago. With the S&P500 close to the 1700 mark, there’s a sense that the rally is limited, with valuations close to the highest level at 16 times. This will hamper further recovery in the Asian markets.
Gold prices have taken a beating after consolidating at the $1340 resistance level we set on 22 July, which was the 23.6% Fibonacci retracement level since its peak in September last year. We expected two possible scenarios and one has played out - it is retracing to $1300. If this level holds and the dollar weakens, we will see gold moving back up again. For the time being, gold investors will remain skittish until we receive further clarity from the Fed to dispel tapering talks.
Copper is swinging between gains and losses, with bullish and bearish comments coming through the newswires. Southern Copper CFO, Raul Jacob, said the company expects demand to exceed the GDP growth rate of 7.5% in China, yet Goldman Sachs expects surpluses to double in two years. We maintain our view that copper has found a bottom and is trading in a channel. It touched our resistance level of $325 mentioned on 23 July and is currently trading on the support level. We will watch price action closely for any breakouts in either direction.
WTI is consolidating at our support level of $105 mentioned in yesterday’s report. A combination of factors, including China’s weak data, higher-than-expected US output and sellers at these levels will see this level tested. A light data day from Asia could mean tight, range-bound trading for WTI today.