Forex Today: Gold, Silver Reach New All-Time Highs

Eyes are on precious metals today as this asset class continues roaring ahead:

Trend traders will want to be long of these precious metals. However, it is wise to respect the very high volatility here, especially in Silver, and trade with relatively small position sizes. Do not be surprised if the strong advance suddenly collapses, and following that, the prices may or may not come back strongly.

There are supply issues with Silver, and as advanced economies move towards lower interest rates, that tends to boost the prices of precious metals. But these huge rises cannot be explained fundamentally. It may be institutional investors piling in to try or be seen to try to cash in on these rises - a kind of "Santa Claus" rally in precious metals instead of stocks.

The Japanese Yen has been in the news over the past few days following the Bank of Japan's widely expected rate hike last Friday. It was a very dovish hike, because the Bank made clear that it would only hike insofar as negative real rates were maintained (ie. the interest rate will always be below the rate of inflation). Yesterday, the Japanese Government's top FX official Mimura threatened intervention to prop up the Yen, which has sent the Yen higher over the past day against most currencies. Nevertheless, there is a good case to be short of the Yen, and trend traders will likely still be short of it, probably by being long USD/JPY.

In the Forex market, since today's Tokyo open, the strongest major currency has been the Japanese Yen, and the weakest has been the Canadian Dollar. The USD/ZAR currency pair has just made a fresh 3-year low, so this might be attractive to carry traders looking to benefit from the 6% interest rate South Africa offers.

There will be a release of Canadian GDP data today. A major surprise could move the Loonie somewhat.