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Market News 【Market Morning】Gold ends higher, but stay below $1,800, Dow and S&P 500 close at records

【Market Morning】Gold ends higher, but stay below $1,800, Dow and S&P 500 close at records

Dollar edges lower as Fed policy decision looms; Oil ends higher with OPEC+ expected to keep current output deal in place this week; Gold price finish higher, but stay below the $1,800 mark.

TOPONE Markets Analyst
2021-11-02
484

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Yesterday Market Review


Gold price finish higher, but stay below the $1,800 mark


Spot gold price settled higher on Monday, but remained below the key $1,800 mark as the market awaited Wednesday's Federal Reserve decision on monetary policy. 


“Inflation continues to worry central bank officials, with lingering supply-chain issues and high energy prices making a protracted rise in consumer prices more likely than previously thought,” said Ricardo Evangelista, senior analyst at ActivTrades, in a daily note.


Against that backdrop, “the Federal Reserve looks set to announce the beginning of the tapering of its asset purchase program when it holds a policy setting meeting later this week — a scenario that is likely to offer support to the dollar and penalize the precious metal, due to the inverted correlation between the two assets,” he said.


For now, however, the two levels to watch in the global gold market “remain support at $1,725 and resistance at $1,835,” analysts at Sevens Report Research wrote in Monday’s newsletter. “Until one of those levels is violated gold will remain pinned in a sideways trading range.”


Spot gold rose 0.7%, to settle at $1,795.80 an ounce, spot silver was also up 0.5%, to $24.073 an ounce. 


Gold was pressured last week as the dollar rallied. A stronger dollar can be a negative for gold and other commodities priced in the unit, making them more expensive to users of other currencies.


Dollar edges lower as Fed policy decision looms


The dollar eased versus its main rivals on Monday, after posting its biggest daily rise in more than four months in the previous session as hedge funds cut back bearish bets ahead of this week’s highly-anticipated U.S. Federal Reserve policy meeting.


Monetary policy in the United States, Australia and the United Kingdom is in focus, with the Federal Reserve widely expected to announce a tapering of stimulus, a factor that has fueled the greenback’s rise in recent weeks.


Quickening inflation data has prompted some investment banks such as Goldman Sachs to advance their expectations of a rate hike by the Fed as early as July 2022, compared with the third quarter of 2023 previously.


The US dollar index, which measures the U.S. currency against six rivals, was down 0.098% at 94.104, hovering close to Friday’s peak of 94.302, its highest since Oct. 13.


“You had a move on Friday based on the PCE and you’ve got a little bit of a pullback right here,” Joseph Trevisani, senior analyst at FXStreet.com said. “Nobody is quite sure of what the fed is going to do.”


The euro edged up 0.04% to $1.15665 after having given up most of its European Central Bank policy gains, touching $1.1535 on Friday, its weakest since Oct. 13.


The Aussie dollar ticked 0.01% higher to $0.7521, having fallen off its nearly four-month high of $0.75555 reached last week.


The British pound touched its lowest in more than two weeks versus the dollar, pressured by uncertainty over the Bank of England’s policy stance and an escalating post-Brexit spat with France over fish.


Oil ends higher with OPEC+ expected to keep current output deal in place this week


Crude oil price kicked off November with a gain on Monday after hitting multiyear highs last month, as investors expect the Organization of the Petroleum Exporting Countries and their allies to remain reluctant to accelerate production increases despite tightening crude supplies.


The group of oil producers has “so far refused to act despite a severe power crunch in Europe and repeated calls for higher oil output from India and several other oil importing nations,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a note.


OPEC+ may keep to the current agreement and raise output by 400,000 barrels per day, or it may decide to lift production even more. The group may opt to raise output by 800,000 barrels per day this time, “in order to reduce the immediate risks of any supply shortages and to ease the pressure on prices, but then don’t raise output at all in the next meeting,” said Razaqzada. “Any deviation from the current policy should move oil prices sharply.”


West Texas Intermediate crude rose 0.6%, to settle at $84.05 a barrel, Brent crude oil added 1.2%, to $84.71 a barrel.


The Biden administration has called on OPEC+ to boost output, but producers have remained reluctant. OPEC+ has so far stuck to a plan to boost output in monthly increments of 400,000 barrels a day, but members have struggled to hit that goal. The group is slated to meet Thursday.


Oil prices climbed Monday despite news that China has released reserves of gasoline and diesel to boost supply and help stabilize prices in some regions, according a Reuters report Sunday, citing a statement from the National Food and Strategic Reserves Administration.


Dow and S&P 500 close at records to start November, small caps post best day since August


Stocks rose slightly to new records on Monday — the first trading day of November — after markets emerged from a historically tough seasonal period successfully.


The Dow Jones Industrial Average rose 94.28 points to 35,913.84, helped by gains in Boeing and Dow Inc., closing at a fresh record. The S&P 500 rose nearly 0.2% to 4,613.67, closing at an all-time high. The tech-focused Nasdaq Composite added 0.6% to 15,595.92 and also hit a closing record.


Tesla, which became a $1 trillion company last week, continued its gains for the year with shares up nearly 8.5%. Investors have been piling into bets on Tesla options as of late.


Stocks linked to an economic recovery, such as Ford and Occidental Petroleum, were also higher. Ford gained 5% and Occidental Petroleum popped 3.8%. Airlines and retailers were mostly in the green, while mega-cap tech stocks underperformed.


“In our view, the key story arc driving equities is the strengthening global recovery,” wrote Fundstrat’s Tom Lee in a note to clients. “COVID-19 trends are improving, but with vaccinations and boosters, the improvement in health care risk could materially accelerate in 2022.”


After a tough September in which the S&P 500 fell more than 4%, the benchmark jumped nearly 7% last month. September is typically the worst month for the market, averaging a 0.4% decline since 1950, according to the Stock Trader’s Almanac. The market typically averages a gain in October, but the month is known for notable crashes so investors were a bit wary as the month began.


The Dow Jones Industrial Average rose 5.8% in October. The S&P 500 rallied 6.9% last month and the technology-focused Nasdaq Composite added nearly 7.3% in October.


For the year, the S&P 500 is up more than 22%.


In past years when the S&P 500 is up more than 20% in the first ten months of the year, performance in November and for the remainder of the year was positive every time, according to Bespoke Investment Group.

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