Currently, a large Risk Off-Risk On Trade is underway. Back and forth. Gold price, Swiss Franc, Dax and Dow we want to have a look at now. Risk Off means that investors flee from stocks out of fear (in this case of a further spread of coronavirus and the economic effects) and start looking for safe investments like Gold. Especially last weekend, when many new infections were reported in Iran, South Korea, but especially in Italy, fear increased and the Dow 30 dropped suddenly by a good 1,000 points from Friday evening until last night. Then until this morning the index was able to gain more than 200 points in the futures market. So we could hope that the market would show an upward counter-reaction today. Currently there are new cases on Tenerife (more information here).
But no, so far the futures have fallen again, and the Dow is again trading around the 28,000 point mark. It is currently threatening to fall below the lows of yesterday. Is a second crash day on the stock market imminent? That might be decided in these very minutes before trading starts at 3:30 pm German time. The Dax fell more than 500 points yesterday, only to make a small upward move this morning like the US markets. So they cautiously tried to take some risk again. But no, the Dax is currently at 12,945 points, even 25 points lower than yesterday’s low. The stock prices are thus pointing further downwards (at least according to the current level). Click here for Markus Fugmann’s market commentary on whether the correction continues.
Gold price shows countermovement
The Gold price had risen yesterday by $46 compared to Friday evening, to a peak of $1,689. Then it went down sharply today to as low as $1,632. A strong counter-reaction after the very strong rise in the Gold price in recent days and weeks (more details here). By 12 pm today it then rose again to $1,657 (currently $1,645). The chart (showing the Gold price in US Dollars since tonight) shows how unstable the situation is at the moment. Gold was able to make up part of its probably too large downward correction. If stock prices continue to weaken in the next few hours, the Gold price could rise again quickly (could, not must!).
Swiss Franc continues to rise
The Swiss Franc is a safe haven in the Risk Off-Game just like Gold, to put it this way. Yesterday, the low for the Euro vs. the Swiss Franc was 1.0589. Currently, the exchange rate is fluctuating around the 1.06 mark. The following chart shows the price over the last twelve months. A crystal clear trend towards an ever stronger Franc (falling Euro). The current Risk Off environment is fueling the strengthening of the Swiss Franc (more details here).