The Chinese New Year is a time for regeneration and new beginnings. This year marks the year of the ox, an animal that is steadfast, sure and reliable – all of the qualities we hope we provide our clients with here at AvaTrade. An ox is a patient animal that conducts itself with calm, the qualities required by any proficient trader.
The Chinese New Year impacts various financial markets as China is such a leading player and consumer on the global economic stage.
Here’s how the holiday can affect the markets:
- Expect a drop in trading volume in the 2-week run-up which hits a low the day before the New Year.
- There is very low liquidity and very high volatility in the markets which can cause extra price spikes – an opportunity for traders, although tread carefully.
- The Chinese give gifts of gold over this period, and as a result, the prices rise dramatically. Furthermore, China is a leading producer of gold and as the locals are not working supply slows down, which itself impacts the gold price. Gold prices often drop in March – Directly following the CNY, Gold prices which are cyclical in nature start to drop on the back of lower demand.
- Silver, platinum & palladium –The CNY affects metals including Silver, Platinum, Palladium, Copper and Steel. These are all manufactured and consumed heavily in the region. Copper futures can drop up to 50% following the holiday.
- Once the Chinese have gone on their New Year breaks, you can expect oil demand to drop even further.
China, which is the world’s second-largest economy and the largest global manufacturer and consumer of commodities anywhere, comes to a complete standstill for several weeks in the run-up to the Chinese New Year.
Factories are literally shuttered and bolted, and the supply chain comes to a halt as the locals enjoy the festivities and travel from one side of the country to the other to see their loved ones.
Happy Chinese New Year!