CME outage triggers global market impact

Wmax monitoring shows that the Chicago Mercantile Exchange Group (CME) recently suffered a sudden data center failure, causing the suspension of trading in key products such as S&P 500 futures, EBS foreign exchange platform, Treasury bonds, crude oil and precious metals, involving trillions of dollars in contracts, and the depth and duration of the impact exceeded similar failures in 2019. The average daily derivatives trading volume of CME Group exceeds 26 million, and the average daily nominal trading volume of mini-S&P 500 and Nasdaq 100 futures is approximately US$1 trillion. The huge volume caused the impact to spread quickly.

The suspension coincides with the post-Thanksgiving off-season, month-end and year-end fund settlement overlapping nodes, resulting in a lack of liquidity hedging tools, restricted treasury bond trading, widening foreign exchange spreads, and a sharp increase in futures delivery pressure. For the precious metals market, the freeze of Comex gold futures and options caused the London spot hedging to fail. Gold prices first surged and then fluctuated. The bid-ask spread soared from US$1 to more than US$20. The lack of economic data due to the US government shutdown further amplified short-term fluctuations.

Core trends in the precious metals market

According to Wmax's analysis, gold is heading towards its best annual performance since 1979. The monthly "four consecutive positives" resonate with the increase in global central bank holdings and the influx of ETF funds. The core driver is the dovish remarks of the Federal Reserve that strengthen expectations of interest rate cuts, coupled with the vulnerability of the financial market exposed by the CME outage, and the preference for safe-haven funds continues to increase. At the end of November, the December gold contract closed at US$4,165.40 per ounce. Although there were short-term disturbances, the core driver remained unchanged and there was sufficient upward momentum.

Wmax tracking shows that the silver market pattern has fundamentally changed: previously due to high volatility, the gold-silver ratio exceeded 100 in April (a five-year high), and has now dropped to 74. Silver hit a record high of $56 per ounce last week, up 97% for the year. During the same period, gold stood at $4,200, up nearly 61% for the year. The core logic is that global electrification has spurred industrial demand, and supply has been in short supply for five consecutive years. Inventories have continued to be depleted. Added to this is Indian procurement, Asian allocation enthusiasm and key metal positioning, and the physical supply tension has intensified.

gold short term strategy

On the policy side, the focus is on the December Federal Reserve interest rate meeting, where the market expects a 25 basis point interest rate cut; technically, London gold was last at US$4,252.51 per ounce (up 0.71% daily), with support at US$4,220-4,230 (funding acceptance area, negatively correlated with the 10-year U.S. Treasury yield of 3.85%), and resistance at US$4,280-4,300. Operational suggestions: Intervene with light positions at US$4230-4240, break through US$4300 and stand firm and add positions on the 2nd; initial position is 15%-20%, and after adding positions, it will not exceed 30%; stop loss is US$4200, target 4350-4380 US dollars.

Silver short term strategy

On December 1, spot silver in London broke through 57 US dollars per ounce for the first time, and COMEX futures once exceeded 58 US dollars, nearly doubling the increase during the year. Shanghai Gold Exchange inventory fell to 715.875 tons (a month-on-month decrease of 58.83 tons), rental rates soared, and the volatility rate was 3 times that of gold. The support level is 55-55.5 US dollars, and the resistance level is 58-58.5 US dollars. Operational suggestions: Trial entry of extremely light positions at US$56-56.5. If the price exceeds US$58.5 and the inventory does not rebound, you can add positions; the total position should not exceed 10% of the precious metal position; stop loss is US$54, target US$60-60.5, and pay close attention to LME positions and leasing rates.

Risk warning

Wmax Tip: The market is risky, so investment needs to be cautious. This report is based on real-time data, industry chain research and quantitative deduction, and does not constitute investment advice. In the short term, we need to be alert to fluctuations caused by CME outages, changes in Federal Reserve policy, and reversals in capital sentiment. Investors should make reasonable allocations based on their own risk tolerance.