Weekly Overview of Global Markets

Market Review and Outlook

Weekly performance of major asset classes:

US Stocks: Last week, the stock that garnered the most attention was undoubtedly Nvidia (NASDAQ: NVDA). On Wednesday, after the market closed, Nvidia announced earnings that exceeded analysts' expectations and a 10-for-1 stock split. The impressive earnings report initially eased concerns in the market, and on Thursday, the US stock market hit a new high. However, concerns about the Fed potentially delaying interest rate cuts were still present following stronger-than-expected manufacturing and services PMI data. This likely contributed significantly to the market falling sharply again on Thursday. Coupled with the release of the Fed meeting minutes earlier, the market has now lowered its expectations of the Fed's interest rate cuts from two to just one cut this year.

US Bonds: US bond yields experienced a surge on Thursday, with the 10-year Treasury yield reaching a high point of around 4.5% and the 2-year Treasury yield rising to 4.95%. Notably, the 30-year US Treasury bond has fallen by roughly 15% year-to-date, potentially marking the third worst annual return rate since 1919.

US Dollar: The US dollar rose by 0.1% on Thursday, closing at 105.03, marking its fourth consecutive day of gains. The forex market indicates that investors are still reacting as expected to strong US economic data, and Bannockburn Global Forex believes that there is still some room for the dollar to rise.

Gold: Gold prices continued to decline on Thursday, with spot gold hovering near its two-week low. It fell more than $90 over the past two trading days. The sudden drop in gold prices is not unrelated to concerns over interest rate cuts due to strong US economic data. Despite the continuous decline, gold prices are still generally trending upward. The short-term RSI has fallen below the 50 midline, indicating that sellers have been the dominant force. Investors should keep an eye on the first support level at $2,332. On the other hand, if gold prices rebound and surpass $2,350, the $2,400 threshold may be broken, and prices may continue to rise.

Note: The weekly performance of major asset classes is ranked based on the weekly change in the asset class as shown in the table above, with ">" indicating the ranking from highest to lowest. US bonds are ranked based on the change in futures prices. Past returns do not guarantee future returns.

Data source: Bloomberg. Date as of May 24th, 2024

Weekly Hot Topic

Precious Metal Prices Hit a Record High! What's Next for Investors?

Last Monday, spot gold reached a new all-time high but then saw a correction at higher levels. Silver and copper, both of which are precious metals, also saw significant gains, with spot silver surpassing $32 per ounce, its highest level in 11 years, and London copper hitting a new record high during trading.

There are several possible factors behind the recent rise in precious metal prices.

• A weak US dollar, due in part to the US government's $1.5 trillion federal deficit, is supporting metal prices denominated in dollars.

• The rise in gold and silver prices may also be attributed to broader economic concerns and investor demand for diversification. On one hand, economic uncertainty appears to have driven demand for safe-haven assets like gold and silver. On the other hand, copper, although not considered a precious metal in the same way as gold and silver, is an industrial metal that is benefiting from expectations of increased demand. Supply chain disruptions and the growing demand for renewable energy installations and electric vehicles have been driving up demand for copper.

• Market speculation has also played a role in pushing up copper prices, leading to short squeezes for traders holding short positions in Comex copper futures. As prices rise, participants are no longer able to finance their positions and are forced to buy back these positions, contributing to the historical high price difference between LME and Comex copper prices.

Both silver and copper tend to have a relatively fixed price range compared to gold, so when gold prices rise significantly, silver and copper prices often follow suit. Currently, the gold-copper and gold-silver ratios are historically high, so from a price regression perspective, there may still be room for silver and copper prices to rise.

However, some analysts remain cautious. Analysts from Gold Newsletter predict that the recent momentum will turn into a significant price correction. Libertas Wealth Management analysts state that although the current momentum for gold, silver, and copper indicates potential for further price increases, the recent price increases also increase the risk of a short-term pullback. The long-term trend of precious metals depends on the ever-changing economic landscape, currency policies, and industrial demand, especially in the renewable energy and technology industries.

Important Events Outlook for This Week

Q1 2024 GDP

The Bureau of Economic Analysis has released the preliminary estimate for the first quarter of 2024 Gross Domestic Product (GDP), which shows an annual growth rate of 1.6% for the quarter. This is a slowdown from the 3.4% growth rate in the fourth quarter of 2023. The slower growth rate in the first quarter can mainly be attributed to a slowdown in consumer spending, exports, state and local government spending, and a decrease in federal government spending. The second estimate of GDP, which will be based on more complete source data, is set to be released on May 30th, 2024.

PCE price index

In March, the core Personal Consumption Expenditures (PCE) index rose by 2.8% year-on-year, which is the same as in February but slightly higher than the market's expected 2.7%. The PCE price index also rose by 2.7% year-on-year, which is slightly higher than the expected 2.6%. If the PCE data continues to indicate inflationary pressures, it may lead to short-term fluctuations in the financial markets, and investors should be aware of the potential risks of a market correction.