HALF TIME

BY ANDREW LEONG

Good as Gold

Gold has been a safe haven staple: Demand for it, from investors flocking to the precious metal during this period, confirms its endurance as the world battles the COVID-19 outbreak. After a sharp pullback in early March, gold has since been trading with modest gains.

Accompanying the hit that financial markets took, we see industrial production recording its steepest decline since early 1946. Meanwhile, the International Monetary Fund has estimated that the outbreak could cause the global economy to shrink by 3 percent in 2020 — the biggest collapse since the Great Depression. As countries continue to extend their nationwide lockdowns, we foresee a deeper economic slowdown looming.

We would keep an eye out for a new wave of risk aversion to flood the market as investors digest the severity of the collapse in the global economy and the deeper effects coming to light. When that happens, we are likely to see demand for the precious metal climb higher, given its perceived value as a safe haven asset. That said, we do caution the sustained USD strength, which could keep a lid on any strong gains for the dollar-denominated commodity.

What’s the EFG team trading now?

Singapore’s currency is strongly correlated to the USD. With the USD serving as the “big brother” of all currencies, we can see the USD surge in strength since the pandemic started to hit global economies.

From a technical perspective, we see further strengthening of the USD against the SGD. Price is holding above both the 55-days moving average and Ichimoku Cloud indicator at around 1.40870 price region. This first support at 1.40870 is a strong support level, with multiple Fibonacci ratios finding confluence in that zone. We see that a push up above the first support towards the swing high at first resistance at 1.46500 can be expected. This is because during a strong upwards trend, we usually see prices retest recent swing highs. This is supported with Stochastics reacting above its support level, where price bounced strongly (historically) as well.

Given the expected and further weakness domestically in Singapore, investors may consider holding on to the USD now, which may enable higher purchasing power in the future. Follow the performance of this analysis here: https://bit.ly/efgportfolio200506

PEverest Fortune Group began with a vision to provide equal opportunity for traders everywhere through research, training, and technology. Founded by two Singaporean brothers, the company started as a financial research house providing FX analysis to financial institutes worldwide. With the development of their proprietary trading platform, they are bringing together a community of passionate traders and brokers, reimagining the traditional broker-trader relationship and revolutionizing the way we trade today.