SHANGHAI, Sept. 26 (SMM) –Fears that the global economy will lapse back into a recession caused financial markets to plummet, which in turn pushed up the US dollar index. In response, market demand for gold weakened, with precious metal prices plunging last weekend. Gold and silver markets experienced large-scale sell-offs, with pessimism dominating markets. Base metal prices tumbled as well, with SHFE three-month copper contract prices registering a decline of 3.44% in the morning session today after falling by the daily price limit last Friday.
Gloomy US economic expectations from the Federal Reserve (Fed) on September 21st triggered market worries over a global economic slowdown, causing slumps in global stock and commodity markets. The Fed said in its statements that the US economy faces "significant downside risks", and confirmed US job markets will recover at a very slow pace, which somewhat proved some investors' fears over US economy slipping into recession. Besides, September PMI in the Euro-zone area fell below 50 for the first time in two years, suggesting the European economy is also facing risks of a recession. In this context, market risk aversion sentiment was growing, and investors were eager to buy dollar and yen for a risk hedge, helping the US dollar index move higher and weighing down prices of precious metals and base metals. The Fed didn't introduce the highly expected QE3, and measures taken by BRICKS countries were also short of market expectations, both of which were negative news for the markets.
At present, global economic growth has significantly slowed down, and investors are selling off assets due to deteriorating European debt crisis. Capital problems caused by the expansion at domestic stock markets will become a major factor affecting the market in the short term, and inflation will also negatively impact the market. In this context, speculations that China will loose credit tightening policies will likely fail. From a long term point of view, previous and base metal prices should fall, and investors are advised to purchase at lower prices.