27 October 2016
The rallies in gold and silver are likely to continue. Photo: HKEJ
The rallies in gold and silver are likely to continue. Photo: HKEJ

Silver price soars to 10-month high

The London silver price surged to a 10-month high of US$16.78 Tuesday, mainly because of a weaker US dollar and strong demand from China.

The metal has already broken the resistance level of US$16.36 and is likely to edge up further to US$16.80 or even US$17.10.

In the short term, silver has solid support at US$15.50-US$15.90.

Meanwhile, the London gold price rose to US$1,246.40 per ounce in morning trade Tuesday.

The yellow metal showed signs of stabilizing early this month after undergoing a correction in late March.

Gold is likely to extend its rally, with resistance at US$1,246-US$1,258.

The euro steadied above 1.13 against the US dollar. Investors are waiting for clues from the European Central Bank meeting on Thursday.

The US Federal Reserve is expected to hold interest rates unchanged at its meeting next week.

However, any indication of an acceleration of rate hikes might boost the US dollar.

William Dudley, president of the Federal Reserve Bank of New York, called on Monday for a “cautious and gradual approach” to interest rate increases, because of heightened uncertainty over the outlook for the U.S. economy.

The euro tumbled to a low of 1.1232 against the US dollar on Thursday last week and bounced back to a six-month high of 1.1465 Tuesday.

But it has failed to break over 1.15, which means it could face some correction pressure.

The currency may ease further if it drops below the 25-day moving average of 1.1285 to the US dollar.

Swiss National Bank chairman Thomas Jordan said the central bank has policy tools to prevent the already overvalued Swiss franc from rising further.

The US dollar jumped to 0.969 against the franc last Wednesday. However, the dollar may correct in the short term if it fails to break over 0.972.

Royal Bank of Australia governor Glenn Stevens noted in his statement after this month’s board meeting that a higher Australian dollar was a complicating factor for the country’s economic recovery.

The RBA will hold its next meeting May 3, and on the same day the government will release its budget before the election.

The government may further relax its monetary policy if the upcoming consumer price index data is surprisingly weak.

The aussie has kept rising since touching a trough in January. It found key support at 0.743 against the US dollar and faces some resistance at 0.78.

The New Zealand dollar fell to 0.6841 against the US dollar Monday, as the first-quarter CPI figure was better than expected.

The kiwi is trying again to break the key resistance level of 0.7 to the US dollar.

This article appeared in the Hong Kong Economic Journal on April 20.

Translation by Julie Zhu

[Chinese version 中文版]

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Sales director, Emperor Capital Group Limited; HKEJ columnist

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