Gold prices could rise to $4,000 an ounce by the end of 2026. Factors that may drive this increase include a more relaxed U.S. Federal Reserve, a weaker dollar, and continued buying from central banks. Fidelity International remains optimistic about gold. Some portfolios have raised their gold allocation to 5% after prices dropped from April’s peak of more than $3,500. A likely decrease in U.S. interest rates could make gold even more attractive.

Gold As A Diversification Tool

August often sees seasonal price drops, combined with ongoing global tensions, such as trade issues and conflicts in Ukraine and the Middle East. These factors push investors to diversify into gold. Although gold has risen over 25% this year, recent prices have stabilized as eased trade tensions reduced the demand for safe-haven assets. Tariffs act like a tax on the U.S. economy and may slow economic growth, which could boost the case for holding gold. The next few weeks might be a good time to prepare for higher gold prices, especially with a likely dovish Federal Reserve. Recent data shows the Consumer Price Index at 3.3% in May 2024. This raises the chances of a rate cut by September to over 60%, according to the CME FedWatch Tool. Derivative traders might consider buying call options to take advantage of this anticipated change in policy.

Demand And Institutional Support

A weaker U.S. dollar, which makes gold cheaper for buyers abroad, also supports this outlook. Central bank demand remains strong, with a net purchase of 290 tonnes in the first quarter of 2024. This is the highest amount ever recorded for any year’s start. Such institutional buying helps create a price floor, making dips an appealing entry point for traders. Gold has paused below its recent peak of around $2,450 an ounce, giving an opportunity to buy at a reasonable price. Historically, gold performs well during periods of Fed easing, as seen in the rally that started in late 2018 ahead of the 2019 rate cuts. We support Mr. Samson’s strategy of increasing investments after price dips. Geopolitical tensions continue to be an important but often overlooked reason to consider gold. Ongoing conflicts and uncertainties related to the U.S. elections could lead to more volatility, making gold a valuable diversifier. For traders, holding long-dated call options might be a cost-effective way to benefit from a potential risk-off scenario. Create your live VT Markets account and start trading now.

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ETH futures are showing a positive trend above 3,795.5, as noted by tradeCompass. Key profit-taking levels for those with long positions include today’s VWAP at 3,815, a liquidity pool at 3,847, and yesterday’s VWAP at 3,874. If prices exceed these points, traders will look towards 3,911.5, 3,974, and 4,024. On the downside, bearish activity occurs only if prices drop below 3,757.5. Partial profit targets on this side include yesterday’s VWAP at 3,847, the July 22 POC at 3,745, and the July 25 VAH at 3,735. A further decline could reach 3,703, 3,680.5, and 3,656. Currently, ETH futures are priced at 3,808, supporting the bullish stance since it’s above the critical level. However, if the price goes below 3,757.5, it would indicate a shift to a bearish view, opening up opportunities for short positions. tradeCompass provides clear insights using volume profile and VWAP methods. Volume Profile helps us understand trading activities, while VWAP assesses market sentiment. Their approach suggests taking profits gradually and moving stop-losses to the entry point after reaching the second target. This helps manage risk and avoids invalidating the strategy by keeping stop-losses too far from the market movement. Given the current market context, we see this bullish trend as a good starting point for the upcoming weeks. It’s important to stay above the 3,795.5 mark, as this is essential for maintaining a positive outlook. A significant drop below 3,757.5 would prompt a reevaluation of this bullish perspective. The overall market environment supports this view, especially with excitement surrounding the launch of spot Ether ETFs. Reports from late May 2024 noted a record inflow of $2 billion into crypto products, with much attention turning to Ethereum. We should interpret the current price movements as early positioning by larger investors before these funds go active. Derivatives data backs this optimistic outlook. Positive funding rates for ETH perpetual futures show that long-position holders are willing to pay a premium. Options market data from Deribit reveals a strong interest in call options with strike prices of $4,000 and $5,000 for the end of the quarter. This indicates that traders are not just cautiously optimistic; they’re betting on significant gains. For a strategy over several weeks, we should extend our analysis to a longer timeframe, looking at the volume profile from the previous month. A solid support level has formed between $3,400 and $3,600, acting as a macro Value Area Low. As long as prices stay above this range, we should consider dips as buying opportunities rather than signs of a trend reversal. Historically, we can reference the Bitcoin ETF launch in January 2024 for guidance. Initially, there was a “sell the news” reaction, with BTC dropping close to 20% before institutional inflows caused a rally to new highs over the following two months. We should prepare for similar short-term fluctuations in ETH once trading officially starts, using these dips to establish longer-term positions. Therefore, our strategy should be to use the identified bullish threshold to start or increase long derivative positions, aiming for higher liquidity areas around 3,974 and 4,024 for initial profit-taking. Moving stop-losses to entry after hitting the second target is crucial for these longer-term trades. This way, we can benefit from the expected upward movement while also safeguarding our capital against sudden pullbacks caused by news events.

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Federal Reserve officials expect that they may need to lower interest rates in the future, but they won’t make any moves this week. There are differing opinions on what evidence is necessary to make changes and what might happen if they wait longer for clarity. Earlier this year, the Fed paused on cutting rates due to worries about inflation from tariffs. However, with tariff-related price increases becoming less significant and signs pointing to a slowdown in hiring, officials are now divided into three groups about whether to start reducing rates again.

Fed Chairman Powell’s Upcoming Press Conference

All eyes will be on Fed Chairman Powell’s press conference, where he may suggest a potential rate cut in September. Watchers will also be interested to see if other Fed members bring up plans for future cuts at their next meeting. Given this situation, we think the best approach is to look beyond this week’s expected pause and prepare for possible market shifts. The division within the Federal Reserve indicates that the future remains unclear, presenting opportunities for those who can predict when a rate cut might happen. We view the current calm as a precursor to a bigger move later this year. The signs of weaker hiring provide a key reason for a cautious approach, but this view is complicated by May’s jobs report, which showed a strong addition of 272,000 jobs, while the unemployment rate rose to 4.0%. This mixed data fuels the discussion mentioned by Mr. Timiraos and highlights the need for more evidence before any actions. We believe this conflicting data will lead the Fed to be careful in their immediate statements.

Market Expectations and Strategies

Markets are already bracing for a change, with the CME FedWatch Tool showing over a 60% chance of a rate cut by the September meeting. This means that any unexpectedly dovish comments from the chairman on Wednesday could drive significant market reactions. We are closely watching for any subtle shifts in his tone that could support these market predictions. Given the uncertainty about timing, we find long-term options on interest rate futures to be especially appealing. These options let traders prepare for a September rate cut or later without being affected by the decline of short-term contracts. Keeping an eye on the MOVE index, which measures bond market volatility, is crucial; it will likely increase if Fed members begin to lay the groundwork for a cut. We can look back to late 2018 when the central bank shifted its policy, and markets quickly adjusted when the Fed indicated a change in direction. Delaying rate cuts, as some officials worry, may require more significant reductions down the line. This risk of a policy error suggests that it’s wise to hold positions that could benefit from such a situation. Our main focus will be on Powell’s press conference, looking for any specific language that hints at a September move. We will then closely observe the public appearances of other voting members in the following weeks. Their speeches will serve as real-time indicators of whether there is growing agreement on a rate cut. Create your live VT Markets account and start trading now.

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The People’s Bank of China (PBOC) has set the USD/CNY reference rate at 7.1511. Analysts had predicted this rate would be 7.1891. This rate is part of China’s managed floating exchange system, which lets the yuan vary by +/- 2% around a central value. The last closing rate was 7.1787.

Liquidity Management

Along with setting the exchange rate, the PBOC added 449.2 billion yuan to the financial system using 7-day reverse repos at an interest rate of 1.40%. Today, 214.8 billion yuan is maturing, leading to a net injection of 234.4 billion yuan. These actions show the PBOC’s commitment to managing liquidity and maintaining the currency’s value. We view the central bank’s decision as a clear statement that they will protect the yuan and prevent rapid depreciation. The fixing was set much stronger than expected, indicating a strong commitment to stability. This sends a message to traders not to bet against the yuan. At the same time, the significant net liquidity injection indicates a focus on supporting the domestic economy. The PBOC aims to keep borrowing costs low to encourage growth while managing the currency’s external value. This means we shouldn’t see the strong currency stance as a sign of tighter overall monetary policy.

Deflationary Pressures

This supportive policy is crucial, as recent data shows ongoing economic weakness. China’s Producer Price Index (PPI), which tracks factory prices, dropped 1.4% in May, marking 20 straight months of decline. These deflationary trends give the bank every reason to maintain ample liquidity, even while supporting the yuan. For derivative traders, these predictable and strong fixings aim to reduce currency volatility. We believe the best strategy is to sell volatility, particularly by writing short-dated call options on the USD/CNY pair. This position benefits from the currency staying stable or slightly strengthening, which is what the authorities are working toward. This approach contrasts sharply with the market shock during the 2015 devaluation. Today’s actions are clear and systematic, designed to shape expectations rather than catch the market off guard. Therefore, we should trade in alignment with policy, expecting a managed and gradual change in the exchange rate. The underlying pressure on the currency persists due to policy differences with the United States. With the Federal Reserve likely to keep interest rates high, the US dollar remains strong, creating a fundamental challenge for the yuan. The significant interest rate gap is the main reason the central bank must intervene so forcefully and consistently. Create your live VT Markets account and start trading now.

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Morgan Stanley predicts that the S&P 500 will reach 7,200 in the next year, marking a 12% increase from current levels. This positive outlook is due to a rebound in corporate earnings, signaling the end of the earnings recession that began in 2022. Several factors are driving this earnings recovery: – Positive operating leverage – Increased AI adoption – A weaker U.S. dollar – Tax savings from OBBBA legislation Additionally, favorable year-on-year comparisons, rising demand across various industries, and potential Federal Reserve interest rate cuts by early 2026 contribute to this optimism.

End of the Earnings Recession

April’s market decline, influenced by tariff news, may signify the end of the earnings recession. The U.S. economy appears to be moving towards recovery, although the market hasn’t fully acknowledged it yet. Morgan Stanley notes that upward revisions in earnings indicate stronger fundamentals. While some worry about high valuations, they believe these are justifiable given the improving economic climate. Market confidence is also boosted by declining economic uncertainty. A new trade agreement with the EU and expected Fed policy easing later this year are enhancing optimism about market growth. This favorable outlook is gaining traction as earnings momentum increases.

Potential Strategies for Investors

With this positive outlook, we believe derivative traders should prepare for a sustained rise in U.S. equities. A simple strategy is to buy call options on major indices like the S&P 500, with expiration dates several months in the future to capitalize on the expected increase. This method lets investors join the rally while keeping risks defined and limited. The earnings recovery described by Mr. Wilson is reflected in the data, making this a credible basis for trading. FactSet reports that the blended year-over-year earnings growth rate for the S&P 500 in Q2 2024 stands at 9.8%, with analysts predicting double-digit growth for the remainder of the year. This data supports the notion that market fundamentals are strengthening. Current market conditions are favorable for adopting these bullish positions. The Cboe Volatility Index (VIX) has been around the 13-14 range, which is historically low. This results in relatively low premiums for call options, creating an opportunity to gain exposure before potential increases in volatility make options more expensive. For those confident that a major downturn is unlikely, selling out-of-the-money put options or put spreads is also an appealing strategy. This approach allows investors to earn premiums based on the belief that the market will either remain steady or rise. Even though the S&P 500’s forward P/E ratio is elevated at nearly 21, above its 10-year average of 17.8, the strong earnings momentum justifies this valuation. The benefits of a weaker U.S. dollar are also becoming evident, as the DXY index has recently declined from its yearly highs. This trend boosts the profitability of U.S. multinational companies, a significant portion of the index. Historically, periods with rising earnings and supportive central bank policies have led to market gains over several quarters. To fine-tune our exposure, we might consider bull call spreads. This strategy entails buying one call option and selling another at a higher strike price, which lowers the initial cost of the trade. This prudent approach allows us to express a bullish outlook while limiting both potential profits and the upfront capital at risk. Create your live VT Markets account and start trading now.

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Dear Client,

Affected by international holidays, the trading hours of some VT Markets products will be adjusted. Please check the following link for the affected products:

Notification of Trading Adjustment in Holiday

Note: The dash sign (-) indicates normal trading hours.

Friendly Reminder:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

The People’s Bank of China (PBOC) is likely to set the USD/CNY reference rate at 7.1891, according to a Reuters estimate. The PBOC uses a managed floating exchange rate system to establish the daily midpoint of the yuan against various currencies, primarily the US dollar. This system allows the yuan’s value to change within a +/- 2% band from a set reference rate. The central bank decides this daily midpoint by looking at market supply and demand, economic indicators, and changes in international currency markets.

PBOC Intervention

If the yuan approaches the edges of this trading band or shows large fluctuations, the PBOC may step in. This intervention stabilizes the yuan’s value by either buying or selling it in the market. With the managed float system in place, the daily reference rate becomes a key signal from the PBOC. The Reuters estimate shows an effort to influence the currency’s value instead of letting market forces control it completely. This suggests a strategy aimed at gradual depreciation rather than sudden changes. Traders should pay attention to the ongoing gap between the official midpoint and market expectations. Recently, the central bank has consistently set the reference rate over 1,000 pips stronger than analysts projected. This indicates a strong desire to prevent the yuan from weakening too quickly, creating a predictable resistance level for trading opportunities.

Volatility Strategies

For those who expect continued stability, selling volatility through options strategies like short strangles may be beneficial. The central bank’s commitment to the +/- 2% trading band sets a clear range, lowering the risk of unexpected large moves. In this environment, traders can profit from time decay as long as the currency stays within this managed range. However, it’s important to be ready for potential increases in volatility since the spot rate has recently been close to the weak end of its trading band. Factors like a strong US dollar and worries about China’s property sector could prompt a shift. Buying out-of-the-money puts on the yuan could provide an inexpensive hedge against sudden policy changes or a breakdown in the trading band. Recent economic data paints a mixed picture that supports this managed approach. China’s Caixin manufacturing PMI for May 2024 exceeded expectations by rising to 51.7, suggesting expansion. Yet, ongoing capital outflows and a weak property market require a stable currency. This policy appears to balance the need to help exporters with a weaker currency while avoiding financial instability. Historically, we’ve seen similar strong defensive actions throughout 2023, with the PBOC using its tools to counteract rapid depreciation. This history indicates that the authorities are both willing and able to intervene significantly to achieve their goals. Therefore, betting against the central bank’s ability to support the currency in the short term may not be wise. Create your live VT Markets account and start trading now.

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A storm warning is in effect for Hong Kong, but it won’t interrupt trading. The Hong Kong Observatory has issued an Amber Rainstorm Warning. Hong Kong’s rain warnings are classified into three levels: Amber, Red, and Black. An Amber alert means heavy rain is possible and could increase to the more serious Red or Black levels. Low-lying areas might experience flooding, so key agencies will be ready to respond.

Severe Weather Response Levels

Red and Black warnings indicate heavy rain that can lead to flooding on roads and traffic issues. These warnings prompt a full response from government departments and service providers to handle the severe weather. Right now, the Amber alert won’t affect trading. Since 2024, Hong Kong’s securities and derivatives markets, including Stock Connect trading, derivatives holiday trading, and after-hours trading, continue to function as scheduled, even in severe weather. With this new policy, the risk of market shutdowns is no longer a concern. We will focus on secondary effects of the storm, such as its impact on economic activity and investor confidence. This means we are now tracking the market’s reaction to disruptions rather than the decision to stop trading.

Market Impact and Volatility

We expect implied volatility to rise if the Observatory issues a stronger warning. The Hang Seng Index has already shown swings of over 5% in the last month due to economic news from mainland China. A severe weather event could trigger another spike in volatility, so we are looking to buy straddles on HSI futures to profit from significant price movements. We are also identifying sectors likely to be affected by flooding and transport disruptions. With Hong Kong’s retail sales dropping by 14.7% year-on-year in April 2024, we believe that consumer stocks and property management companies could face further pressure. Therefore, put options on these stocks seem like a solid strategy for the coming days. One uncertainty is market liquidity if a Red or Black storm signal is issued. Even with electronic trading, many institutional and retail traders might focus on personal safety, which could lead to fewer orders in the market. This low volume could result in exaggerated price movements, causing sharp and unpredictable swings that we need to be ready for. In the past, markets typically rallied after a typhoon cleared and exchanges reopened. However, with the new arrangement that keeps the market open, this clear trigger has disappeared. Instead, we anticipate a longer period of negative sentiment that aligns with the storm’s impact on the city rather than a quick recovery. Create your live VT Markets account and start trading now.

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Morgan Stanley has raised its target for the S&P 500 to 7200, aiming to reach this level by mid-2026. They based this prediction on several important factors affecting the market. Key elements include strong corporate earnings, new trade agreements, and a healthy U.S. economy. They also noted favorable macroeconomic conditions as part of their analysis.

Impact Of AI And Other Factors

Morgan Stanley believes the growing use of AI contributes positively to their forecast. A weaker U.S. dollar and anticipated interest rate cuts by the Federal Reserve are also important aspects. With this fresh long-term target, we think the best approach for the short term is to prepare for ongoing growth while also managing risks during any market dips. In the coming weeks, the plan should be to buy when the market weakens instead of selling during strong rallies. This aligns with a “buy the dip” strategy. This optimistic outlook suggests we should consider purchasing call options on the S&P 500 or related ETFs, particularly during market downturns. Currently, the index trades above 5,300, so any pullback provides a chance to buy in at a lower price while keeping risks defined. This way, we can join in on the predicted gains without taking on too much risk. We might also look into selling out-of-the-money put credit spreads to earn premiums and express a bullish outlook with a better chance of success. The CBOE Volatility Index (VIX) has been low recently, around 13, indicating that options are relatively inexpensive. This makes defined-risk strategies that benefit from a steady or rising market particularly appealing.

Sector-Based Opportunities

Given the focus on artificial intelligence as a growth driver, we should explore options in specific sectors. For example, the Technology Select Sector SPDR Fund (XLK) has surged over 25% in the past year, largely fueled by excitement around AI. We can use options on these ETFs for more targeted exposure to this theme. The expectation of a weaker dollar and upcoming rate cuts adds further strategy layers. Historically, markets tend to rise after the Federal Reserve starts cutting rates, and current data from CME Group shows a strong likelihood of the first cut by year’s end. So, we should brace for increased volatility around upcoming inflation reports and Federal Reserve meetings, using these opportunities to establish our bullish positions. Create your live VT Markets account and start trading now.

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The Monetary Authority of Singapore (MAS) is expected to keep its current monetary policy, based on a Bloomberg survey where 14 out of 19 economists anticipate no changes. A few, including some major financial firms, suggest potential easing could happen. Earlier this year, MAS made two policy cuts to boost growth. However, recent stronger-than-expected economic data indicates a possible pause. Recent reports show that Singapore avoided a technical recession, with steady performance in sectors like manufacturing, services exports, and construction helping the economy to recover.

Monetary Policy Tool

MAS primarily uses the exchange rate as its monetary policy tool instead of interest rates. They manage the Singapore dollar (SGD) against a basket of currencies from key trading partners, shaping the strength of the local currency. The Singapore dollar nominal effective exchange rate (S$NEER) measures currency value. MAS allows the S$NEER to fluctuate within a certain policy band, stepping in when it goes beyond those limits. This policy band has three adjustable parameters: – The slope, which controls how quickly the currency strengthens. – The level, which affects immediate adjustments to the S$NEER. – The width, which manages volatility in the S$NEER. These parameters are regularly reviewed. Given the consensus that the bank will keep its policy steady, we suggest focusing on range-bound trading and low volatility strategies. The outlook is stable, indicating no major changes for the Singapore dollar. This implies that selling options for premium may be a smarter choice than buying them in hopes of a large move. Recent economic figures support this view, showing Singapore’s economy grew 2.7% year-over-year in the third quarter, surpassing expectations. Additionally, core inflation dropped to 3.0% in September, easing the MAS’s need to tighten policy further. These balanced indicators provide a solid basis for the MAS to take a cautious approach.

Market Calm

The options market already reflects this calm period, with one-month implied volatility for the USD/SGD pair recently falling to a five-year low of about 4.5%. This suggests that market players do not expect significant currency swings soon. We should align our strategies accordingly by considering options like selling strangles, which can profit if the exchange rate remains stable within a forecast range. Historical data shows that after policy pauses, like in 2016, the S$NEER often trades within a narrow band for several quarters. This history supports the idea that low-volatility strategies may be successful in the coming weeks. Nevertheless, we must stay aware of external risks mentioned by the surveyed economists, which could cause an unexpected shift. Create your live VT Markets account and start trading now.

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