【TOP1 Morning】Gold prices drop, dollar rebound; Dow jumps 400 points to close at a record

Protesters supporting U.S. President Donald Trump break into the U.S. Capitol on January 06, 2021 in Washington, DC. 

Democrat Raphael Warnock won one of Georgia’s two Senate runoffs Wednesday, becoming the first Black senator in his state’s history and putting the Senate majority within the party’s reach.

Yesterday Market Review

Gold

Gold tumbled more than 2% on Wednesday, hit by a rebound in the dollar as U.S. Treasury yields surged, showing that investors are betting on a Democrat win in the U.S. Senate runoff elections in Georgia.

The spot gold closed at $1917.89 per ounce, the volatility within the day is  $1900.73-$1959.30.

“Higher (bond) yields have boosted the dollar and triggered a selloff in gold that accelerated with stops under $1,935-40,” said Tai Wong, head of base and precious metals derivatives trading at BMO. ”$1,900 is an important pivot that needs to hold to maintain the short term bullish narrative.”

The 10-year U.S. Treasury yield, rose above 1% for the first time since March, increasing the opportunity cost of holding non-interest bearing gold. The dollar index firmed after a dive to 2-1/2-year lows, making gold less attractive for those holding other currencies.

But BMO’s Wong said this was a buying opportunity. “A Democratic Congress with Biden in the White House is a license to spend and that’s not a lower gold environment.”

The silver closed at $27.262, the volatility within the day is$26.575-$27.905.

Bitcoin soared on Wednesday to touch a fresh all-time high, as the cryptocurrency continued trading wildly.

The price of bitcoin rallied above $37,000 this morning .

Forex

The dollar bounced after sinking to its lowest level in nearly three years on Wednesday, with markets anticipating a Democrat win in the U.S. Senate election in Georgia that would clear the path for a larger fiscal stimulus package.

The U.S. dollar index closed at 89.39 the volatility within the day is  89.17 -89.79.

Democrats won one U.S. Senate race in Georgia and led in another on Wednesday, edging closer to a sweep in a previous Republican stronghold that would hand them control of Congress and the power to advance President-elect Joe Biden’s policy goals.

Analysts generally expect a Democrat-controlled Senate to be positive for economic growth globally and thus for most riskier assets, but negative for bonds and the dollar as the U.S. budget and trade deficits swell even further.

The euro gave up earlier gains and was up 0.11% to $1.2312, after earlier having risen past major resistance to as high as $1.2349.

Riskier currencies also surged, with the New Zealand dollar and Australian dollar touching their highest in nearly three years and holding onto most of the gains even as the dollar recovered.

Crude Oil

Oil prices extended gains on Wednesday; West Texas Intermediate crude settled at $50.498 volatility within the day is $49.502-$50.945. International benchmark Brent crude closed at $54.070, volatility within the day is $53.016-$54.581.

Saudi Arabia, the world’s biggest oil exporter, said on Tuesday it would make additional, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March, after a meeting of OPEC+, which groups the Organization of the Petroleum Exporting Countries and other producers, including Russia.

OPEC oil output rose for a sixth month in December to 25.59 million bpd, a Reuters survey found, buoyed by further recovery in Libyan production and smaller rises elsewhere.

Stocks

The Dow Jones Industrial Average rose to an all-time high on Wednesday, with investors optimistic about the prospects of additional fiscal stimulus as results from the runoff elections in Georgia rolled in.

The 30-Dow climbed 437.80 points, or 1.4%, to end the day at 30,829.40, a record. The Dow briefly rose more than 600 points earlier in the session and hit an intraday all-time high. The S&P 500 advanced 0.6% to 3,748.14 and hit an intraday record. The tech-heavy Nasdaq Composite closed lower by 0.6%.

Goldman Sachs expects another big stimulus package to the tune of $600 billion in the near term if Democrats prevail and take the Senate.

Tech stocks — the best-performing market group over the past year — lagged on Wednesday amid concerns over higher tax rates. The prospects of new stimulus also made tech stocks less attractive relative to beaten-down cyclical names. Facebook and Amazon both fell more than 2%, and Netflix dipped 3.9%.

Tesla (TSLA) – Morgan Stanley raised its price target for Tesla to a Street-high $810 per share, following better-than-expected fourth-quarter deliveries. Morgan Stanley maintains an “overweight” rating on the stock. The shares rose 3% in premarket trading as of 7:47 a.m. ET.

Alibaba (BABA) – Alibaba is planning to raise at least $5 billion through a dollar-denominated bond offering this month, according to people with knowledge of the matter who spoke to Reuters. One of the people said the offering could potentially raise as much as $8 billion for the Chinese e-commerce giant.

Apple (AAPL) – Apple paid out 179% of its targeted bonuses for 2020, after remote work boosted its profits. CEO Tim Cook’s cash bonus for the year rose 40% to $10.7 million, in contrast to the 36% drop in his 2019 bonus.

Focus Tonight:

21:30 (GMT+8): United StatesInitial Jobless Claims (02/JAN),Forecast:800K, Previous: 787K;