Weaker US dollar led to strong rebound in precious metal and crude oil prices after the Jackson Hole symposium, in which central bank sent market a dovish-biased signal of gradual increase in interest rates amidst strong economic data and moderate inflation.

Fed members also defended central bank’s neutrality in monetary policy decisions, against President Trump’s recent criticism about strong US dollar as a result of continuous rate hikes. The probability of September rate hike, according to CME’s FedWatch tool, now stands at 96%.

Gold price rebounded 1.7% to US$ 1,207 area this morning, marking its biggest intraday gain in nearly five months. Technically, the SuperTrend (10,2) and 10-Day SMA have both flipped upwards, suggesting possible trend reversing. Momentum indicator MACD has also formed ‘golden cross’ in its daily chart, signalling that downward momentum has depleted and we may see this technical rebound to carry on should dollar remains weak in the days to come. Its immediate resistance level, according to Fibonacci Retracement, can be found at around US$1,238 (38.2% Fibonacci Retracement).

Strong US session last Friday is likely to lift Asian equities at opening this morning. Strong rebound in offshore renminbi CNH is likely to provide support to China A-shares as well. Higher crude oil price will underpin Singapore’s offshore and marine sector due to their high positive correlation.

The Shanghai Composite tested a key psychological level at around 2,700 points again last week and proved to be a strong support once again. The market has been punished by trade tensions as well as liquidity stretch over the past few months. This situation is likely to improve as Chinese central bank is easing its monetary policy to support liquidity and trade risk has already been priced-in ahead of any material impact to the economy, cushioning the downside.

Gold - Cash

By Margaret Yang in Singapore

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