On December 16, against the backdrop of the Federal Reserve's December interest rate meeting and the bipartisan fiscal stimulus negotiations in the United States, market expectations for continued monetary policy easing and fiscal stimulus in the major economies led by the United States are booming. Market optimistic expectations for the economy, a rebound in the prices of industrial products such as crude oil have pushed up inflation expectations, and major asset prices, including gold and silver, have rebounded.
In the early morning of the 17th in Beijing, the closely watched Fed's December meeting is expected to bring great fluctuations to the financial markets. at a sensitive time when the US bipartisan negotiations on a new round of fiscal stimulus are close to being reached but have not yet finally landed, the Fed will most likely maintain its existing loose position to help the real economy recover under the impact of novel coronavirus's epidemic. The continued loose monetary policy environment will provide support for most asset prices, including gold and silver prices, but due to the high upbeat expectations in the early market, we need to beware of the risk that loose expectations fail.
Looking ahead from the Fed meeting, the Fed is likely to adjust the structure of its asset purchase program to expand easing after Fed officials thought at the November meeting that the Fed could provide more easing in a variety of ways. and specifically mentioned the Bank of Canada by extending the duration of bond purchases to provide more easing as an analogy. For precious metals, the planned launch of more easing tools means a clampdown on nominal and real interest rates and will support precious metals prices, but financial markets may be under pressure if expectations fail.
In addition, the Fed may update its asset purchase program guidelines this time to provide more direction for the follow-up adjustment process of QE. The Fed mentioned in the minutes of its November meeting that it may update the relevant QE guidelines in the future. In the future, the market may form a clearer prediction of the pace of Fed asset purchases through the observation of more specific economic data, such as inflation rate and employment situation. This will provide a clearer picture of the possible inflection point in Fed monetary policy in the future, but given that Federal Reserve Chairman Colin Powell has repeatedly stressed concerns about the uncertainty about the outlook for the US economy, the inflection point in Fed monetary policy is not expected to come in 2021.
In addition, considering that the Fed meeting is after novel coronavirus's vaccination, the Fed may adjust its future economic forecast for the United States based on the improved epidemic forecast, especially the adjustment of core economic indicators (focusing on inflation and unemployment). If this economic forecast is more optimistic, it may trigger fears of an earlier tightening of monetary policy in the future. Compared with the previous Fed's post-September economic forecasts, the current US unemployment rate has fallen more than the median expected, and the Fed is likely to lower its forecast for the unemployment rate.
On the whole, the main focus of the current financial markets is on the new round of fiscal stimulus and the trend of the Fed's monetary policy, especially the recent resumption of fiscal stimulus negotiations. The epidemic in Europe and the United States is still grim. The rising prices of crude oil and other industrial products have pushed up inflation expectations, and gold and silver prices still have support. But the market funds differ greatly on the price of gold. Gold ETF outflows continue to fall to their lowest level since July, but CFTC net long positions have rebounded to their highest level since April. In operation, it is recommended to pay attention to risk control before major risk events, give priority to short-term light band operation, and focus on gold and silver direction guidance.
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