The Chinese New Year – a Time for Fresh Beginnings

The Chinese New Year – a Time for Fresh Beginnings

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.

You can trade leading Chinese stocks like Alibaba and the ChinaA50 index here at AvaTrade. Maximise the opportunities and volatility of the Chinese New Year.

Happy Chinese New Year!