SMM: on the evening of October 28th, both COMEX gold and silver futures fell sharply, the New York gold main contract fell 1.7%, the settlement price was 1879.20 US dollars, and the New York silver main contract fell 4.9% to 23.359 US dollars. When domestic morning trading opened, Shanghai Bank fell nearly 4% to 4969 yuan / kg. Shanghai gold fell nearly 1.4% to 399.90 yuan / gram. The correction of precious metal prices is the result of the influx of market funds into the dollar as a result of the resonance of a number of macro bearish factors. At a time when the general election is approaching the severe epidemic situation and multiple uncertainties are high, the short-term bearing materials of precious metals are likely to maintain a wide range of shocks. In the follow-up, we need to focus on the results of the election, fiscal stimulus, epidemic vaccine and other important events.
The recent results of the fiscal stimulus failed, and the market risk sentiment cooled after Trump announced that the fiscal stimulus would be postponed until after the election. In terms of the general election, early market expectations for a Biden victory and a Democratic sweep were strong, but as election day on November 3 approached its final week, Trump's opinion polls rebounded and the gap between swing states and Biden narrowed significantly. Trump's conservative nominee for justice has been approved by the Senate. The election situation is in a state of anxiety, with the controversy over the counting of votes in the general election in the coming month, the probability of the announcement time being artificially delayed has increased, and the uncertainty of the general election has dampened the market's risk appetite. In addition, the epidemic in Europe and the United States has rebounded sharply recently, and many European countries have blocked it again, further stimulating market risk aversion. The resonance of the three macro negative factors led to the rise of the dollar index, which is the main reason for the sharp correction of precious metals.
The global epidemic spread in the first half of this year and the sharp rise in precious metals prices was mainly due to a weaker dollar index dominated by the Fed's pace of expansion, downward interest rates on US Treasuries and rapidly rising inflation expectations supported by massive fiscal stimulus. Under the grim situation of the rebound of the epidemic in Europe and the United States, the downward space of US debt interest rates has been compressed compared with the previous period, there is no sign of fiscal stimulus landing in the short term, inflation expectations have basically completed the recovery and repair, facing greater pressure, and it is more difficult for real interest rates to go down. As of October 28, the 10-year real interest rate center moved slightly higher than the previous period, fluctuating around-0.90%, while the 10-year Treasury interest rate fell slightly to 0.79%. 10-year inflation expectations fell back to 1.70%. In terms of the dollar, the Federal Reserve tends to be conservative in monetary policy, the ECB's expansion comes from behind, and the economic recovery of the United States is stronger than that of Europe, and the downward support of the dollar index is insufficient. If the European and American epidemic rebound situation continues to worsen, superimposed election factors, it is difficult to cool down the market risk aversion in the short term, and there is still great upward pressure on the dollar index. However, the market environment near the general election has many variables and changes rapidly, and the short-term pressure and high fluctuations of precious metals continue.
Generally speaking, if the epidemic is out of control, there is no positive progress in vaccines, and the results of the general election are not settled, it is highly likely that precious metals will continue to be under pressure to maintain a wide shock pattern in the short term, and silver, which is more flexible, will face greater risk of two-way fluctuations. Follow-up precious metals to break through the shock range to rise, we need to wait for the market environment factors to change and break the situation. The arrival of a new round of fiscal stimulus or election results, the introduction of novel coronavirus vaccine, and the mitigation of the epidemic situation in Europe and the United States will become an important driving force for the rise of precious metals in the future. In the long run, there is limited room for the recovery of nominal interest rates on US debt, the relaxation of the inflation target is good for the rebound of medium-and long-term inflation expectations, the fiscal stimulus will eventually be introduced after the election, and the long-term asset allocation of precious metals remains prominent.
Operational suggestions: the election is approaching short-term wait-and-see to avoid risk, medium-and long-term gold pullback after bargain absorption, silver more see less move cautious operation, pay attention to risk control.
