Overnight news from October 27. First, Brazil's election has concluded, with incumbent President Lula completing a comeback, defeating his opponent Bolsonaro with 51% to 49% of the vote, winning his unprecedented fourth term.
ATFX Commentary: Lula's victory caused the Brazilian real to depreciate sharply against the US dollar. During the two hourly candles from 23:00 to 24:00 yesterday, USDBRL rose from a low of 4.9766 to a high of 5.4424, a gain of 4,658 basis points. The depreciation of the Brazilian currency indicates that international capital viewed Lula's victory as negative news for Brazil's economy. Brazilian stock index Ibovespa futures plunged 20%, triggering a circuit breaker mechanism, confirming market panic. The sharp fluctuations in the Brazilian real and stock market have impacted the stability of international markets. Gold and silver, as safe-haven assets, were sought after amid exposed risk sentiment in Brazil. However, due to limited international gold and silver trading volume from Brazil, it is currently insufficient to support the decline in gold and silver.
Second, the US national average gasoline price is $4.286 per gallon. European natural gas prices briefly broke through 97 euros per megawatt-hour, the first time since 2022.
ATFX Commentary: The rise in refined oil prices in the US and Europe is partly due to the blockade of the Strait of Hormuz disrupting crude oil supply, and partly because a large number of refining facilities were destroyed in the US-Iran conflict and the Russia-Ukraine conflict, directly pushing up refined oil prices. Countries around the world are facing imported inflation, and most central banks have already raised rates or have plans to do so. Gold and silver, as non-yielding safe-haven assets, have lost their comparative advantage, and the bearish trend may continue.
Market Analysis (H1)
Figure 2, XAUUSD hourly chart - ATFX. Since the Asian session on October 23, XAUUSD has maintained a narrow sideways oscillation, with an upper limit of $4,029 and a lower limit of $3,975. Among overnight news, Brazil's election was bullish for gold while rising international oil prices were bearish for gold, with the combined impact leaning bearish. It is recommended to watch the bottom support at $3,975, and the night session may test the effectiveness of this support. ATR is quoted at 13.51, and any directional trade should have a stop-loss range within 2 times ATR.
Figure 3, XAGUSD hourly chart - ATFX. Silver's hourly trend is similar to gold, maintaining a narrow sideways range with an upper limit of $54.54 and a lower limit of $53.00. Silver has prominent industrial attributes, and its volatility is much higher than gold. In the evening, watch the support level at $53, which may break through before gold. ATR is quoted at 0.346, and any short-term trade stop-loss range is not recommended to exceed 2 times ATR.
Federal Reserve:
Figure 4, Federal Reserve rate hike probability - ATFX. Federal Reserve monetary policy determines the medium- to long-term trends of gold and silver. According to CME FED WATCH data, the probability of a Fed rate hike this week is only 9.4%, with a high likelihood of standing pat. The probability of a rate hike in December is 72.1%, significantly higher than around 53% last week. Rate hikes are bullish for the US dollar index, especially with such strong holiday expectations at present. Even if there is bullish news for gold and silver, bulls will find it difficult to push prices higher on the board.
ATFX Risk Warning, Disclaimer, and Special Statement: Markets carry risks, and investment requires caution. The above content represents only the analyst's personal views and does not constitute any operational advice. Please do not treat this report as the sole reference basis. At different times, the analyst's views may change, and updated content will not be notified separately.
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