In the trading world, we often come across quotes which resonate the nature of the markets. The quotes become a part of daily life of a trader and depict the practical aspects of the markets. One such quote is ‘History repeats itself’. The quote symbolises that what has happened in the past cannot be forgotten but can be utilised in the future with a notion that the markets have an uncanny knack of repeating price movements with a re-occurrence of the particular event. We witnessed several changes in the financial markets in the preceding year. Hence, it is only apt that we pay an ode to these notable trading days in reverse order of importance to be etched in our memories.
December 15 – FOMC Hikes Rates
Given the robust US economy, the Federal Open Market Committee (FOMC) raised the federal fund rate by 25 basis points to 0.75%. The move was widely expected as CME’s Fed Watch Tool had factored in a 100% probability of a rate hike before the FOMC decision that day. However, even though the move was widely anticipated, the price of gold in the international markets dropped significantly to $1122.73 per troy ounce on the aftermath. The price was the lowest since 2 February 2016.
October 4 – Day of Uncertainty
Gold dropped $45 on the day to leave the markets bewildered. The factor for the drop was not clear and likewise, market analysts had a field day trying to figure out the catalyst for the slump. Some suggested that due to the probable rate hike in December, the prices declined. An appreciating greenback pressurises the bullion as it does not yield an interest. Secondly, the US Vice-Presidential debate occurring at that time could be the reason for the drop. However, technical analysts opined that the price had been signaling the potential for a breakdown in the gold price since the bullion treaded up after the BREXIT saga. The prices had time and again tested the support level of $1300 level on three occasions but failed to breach it. However, on October 4, the prices, having commenced at $1310.34 per troy ounce, dropped to $1266.43 per troy ounce to leave the markets dazed.
June 24 – BREXIT Referendum
Before Great Britain voted whether to ‘remain’ or ‘exit’ the European Union, market polls showed that the general consensus was of the Great Britain remaining. However, on the day, as it became apparent that the Great Britain had voted for the exit, the world stood and watched as the financial markets pressed the panic button sending different trading instruments to all directions. The result was followed by the resignation of the then British PM, David Cameron, who had initially called for the referendum and had favoured the ‘Remain’ camp. The Great Britain Pound lowered to its lowest in 30 years against the US Dollar to 1.3299 sending shockwaves throughout the world. Gold benefitted as a result inclining by $108 to reach the highest price of $1358.33 per troy ounce. The attained price was the highest since March 2014. Within two weeks, the prices further inclined as the traders factored in the results in their trading strategy.
November 30 – OPEC Cuts
OPEC members had agreed to cut the supplies to ‘stabilise the markets’ in a meeting against the backdrop of the International Energy Forum in Algeria on September 28, 2016. However, the meeting stated that the details of the agreement will be finalized at the next OPEC meeting on November 30, 2016 in Vienna. There was considerable debate whether Saudi Arabia could convince the other nations to follow the decision given that most nations in the cartel were seriously in need of cash flow. When the d-day did arrive, the oil markets was seen soaring about nine percent, reversing the price declines in the early stage of the year. Crude oil reached the highest price of $49.87 per barrel, the highest since 27 October 2016. Following the decision, the price inevitably surpassed the $50 mark in the ensuing days.
November 8 – Trump’s Victory
Donald Trump, the unfavored Republican candidate for President at first, delivered a surprise and won the election with a clean sweep of the White House, Senate and House of Representatives. The reaction was felt in the global financial markets with the equity index lowering sharply by about five percent. However, the bullion had a mixed reaction during the results days. Gold was calmly trading at $1270 per troy ounce before the results. However, as the result became apparent that Trump had won the battle, gold prices soared by $68 to reach $1337.3 per troy ounce. Thereafter, in an amazing turnaround, gold fell on the back of Trump’s speech where he reignited hope of a stronger America. The bullion dropped in a few hours time to its original level of $1270.
If the above details were anything to go by, 2016 was indeed a year of surprises. Likewise, market analysts opine that we might be for another such year in 2017. The focus on political risk which was in the USA in 2016 is shifting to Europe and commodities are in a constant battle as demand and supply forces are pulling the prices in opposite directions. With the above events of 2016 still fresh in our memory, we must embrace 2017 with a touch of optimism.
Vivek Risal is associated with Mercantile Exchange Nepal Limited in the capacity of Manager in Research and Development Department. He can be contacted at email@example.com