Nov 04 2020 0
Financial markets have mixed reactions on the day the American people vote for their 46th president. Let's check out the financial markets now and see how we can trade the news.
Ups and downs
In the session on November 3, there was a time when the world's gold price dropped to only 1,883 USD/ounce. But then, at the end of the day it increased to 1,895 USD/ounce. Thus, the world gold price is only 5 USD, exceeding the important psychological level of 1,900 USD/ounce to accelerate. Investors tend to look for safe assets like gold before knowing who is president of the US.
Similarly, oil prices also fell slightly at the time of US presidential election. For example, Brent oil and OPEC oil prices decreased by nearly 2% to 38.84 USD/barrel and 36.50 USD/barrel, respectively.
On the contrary, the stock market had an exciting gaining session. The markets of Japan, Korea, Hong Kong... all increased slightly by over 1%. In the US, the Dow Jones, S&P, and FTSE 100 all increased by nearly 2%.
However, the value of USD decreased in comparison with other major currencies in the world. The dollar lost 0.26% of its value against the euro, 0.17% against the pound, and 0.15% against the Japanese yen.
Analysts said that the gold price will be difficult to predict at this time because although the US presidential election ends, the counting of votes takes a long time, especially votes sent from the post office. Therefore, the outcome of who is president will not be clear.
However, experts have the same assumption that the price of gold will rise again when it is precisely Mr. Trump or Mr. Biden as president. Because factors driving gold prices remain intact such as a large amount of money supply, increased inflation, and economic instability due to disease. Even if Mr. Biden is the 46th US president, gold will increase stronger because he will introduce a financial stimulus package to recover the economy stronger than Mr. Trump.
But analysts also warned that gold prices could still face the risk of decline. According to research by TD Securities, if the election results cannot be determined immediately, the precious metal price is likely to fall 4%. In other words, if the results of the election are controversial, gold is in danger of being sold off because investors fear that the US financial bailout package will also be congested.
With oil prices, experts predict that if Mr. Biden is president of the US will cause a boom in oil production. The reason is, Mr. Trump imposed sanctions on the Iranian oil industry, while Mr. Biden tended to be willing to negotiate with Iran. If the country follows the agreements on nuclear restrictions that were made during the Obama era, then the severe sanctions imposed on Iranian oil exports may be lifted.
Then Iran was able to export 2 million barrels of oil a day. This is a large supply while the COVID-19 epidemic is still making the process of oil consumption not large, causing oil prices to plummet.
Unpredictable for stocks and USD
Reported by securities companies, the US presidential election is one of the events that have unpredictable impacts, even stir or bring shocks to the global market, including Vietnam. This year's election may even create more chaos than usual as disease delays the counting of votes.
Experts say that if the Republican party wins, the market will have a quite positive initial reaction because Mr. Trump often uses the stock market as a measure of the effectiveness of his policies. On the contrary, the US economy could face great turmoil when the new president takes office.
In the above context, securities companies recommend investors to disburse part of their account when there are corrections in the session; tight management of risks and provision for the possibility of adverse fluctuations from the US presidential election results.
Experts also predict that the dollar price in the long term is still difficult to improve regardless of who is elected US president. Currently the US dollar index is still 9% lower than its peak in March.
Pressure will likely weigh more on the US dollar should Mr. Biden win. The reason Mr. Biden may be open to many policies that are seen as negative effects on the USD, such as launching a financial stimulus package. Dollar price movements will also be difficult to predict if Mr. Trump is re-elected.