SMM News: COMEX gold prices since the beginning of October showed a weak pattern of oscillations. After hitting 1939 US dollars per ounce in mid-October, it turned back and broke the support level of 1900 US dollars per ounce last week. The Shanghai Gold 2012 contract also lost 400 yuan / g. At present, the price of gold is back to the low formed at the end of September.
Gold price weakens under multiple bearish conditions
Recently, the epidemic in Europe and the United States has further spread, Germany and France have implemented national blockade measures, and stock markets in Europe and the United States and international oil prices have plummeted, while the US economy grew faster than expected in the third quarter and increased risk aversion pushed the dollar index to an one-month high of 94. at the same time, the expected failure of a new round of US fiscal stimulus package superimposed the uncertainty of the US presidential election, and gold prices fell sharply under the combined effect of multiple losses.
At present, the rise of the dollar index is a key drag on gold prices. The dollar index rose, reflecting economic differences between Europe and the United States, ECB easing expectations and safe-haven funds. The initial annualized quarterly rate of GDP for the third quarter announced last Thursday hit a record high of 33.1%, while the number of initial claims for unemployment benefits in the United States last week hit the lowest level since mid-March. With Europe once again hardest hit by the epidemic, the eurozone economy is under pressure, with its consumer confidence index falling for the first time in six months in October. The ECB signalled that it would add stimulus measures in December, with the euro falling to a four-week high against the dollar. In addition, against the backdrop of declining stock markets in Europe and the United States and international crude oil prices, safe-haven funds buy US dollar assets to avoid risk.
In the later stage, the escalation of the epidemic in Europe and the United States will once again slow down the pace of resumption of work, and drag down part of the demand. The ECB is expected to ease, the Fed is unlikely to ease further, and the stronger pattern of the US economy relative to the euro zone is generally more favorable for the dollar. In addition, before the US presidential election, it is unlikely that a new round of fiscal stimulus package will be introduced, and the weakening of US inflation expectations will be a drag on the trend of gold prices. If the US fiscal stimulus package can be launched after the election, it will boost the US economy and inflation expectations.
Global macro uncertainty causes institutions to reduce their positions and wait and see.
Due to the increased global macro uncertainty and the periodic strengthening of the dollar index, institutions chose to reduce their holdings in gold positions. Since October, positions in SPDR Gold ETF, the world's largest gold fund, have fallen by 10.64 tonnes to 1258 tonnes, especially last week, showing signs of acceleration. CFTC's position data also showed that the overall non-commercial long position of CFTC gold increased by 5945 lots since October, but down from the increase of 12863 hands in September.
At present, there is great uncertainty at the macro level, especially before the US election, the institutional position strategy is more cautious, coupled with the reduced probability of another dollar liquidity crisis, institutions are unlikely to reduce their positions on a large scale, and there is still a need for the allocation of safe-haven assets.
Outlook for the future
In the short term, the epidemic situation in Europe and the United States continues to escalate, the US election is approaching, the market volatility intensifies, while the US dollar index stabilizes and rebounds, the macro level is negative for the gold price, and the short-term gold price is technically broken. Before falling below the September low, bargain building strategy can still be adopted, and the risk point is that macro risk events will aggravate market volatility. The first target under the Shanghai gold 2012 contract is 380RMB / g.
In the medium term, the safe-haven demand of the market still exists, while it is difficult for the US dollar to reach the reversal condition in the context of the debt problem, and the gold price still has support. After the US presidential election, the focus of the market will shift back to the fiscal stimulus package, when inflation expectations will rise and the gold market will make a comeback.
