SMM News: COMEX gold prices have shown an overall oscillatory upward trend since October, breaking through 1930 US dollars / oz in early October and then rising and falling back. During this period, the dollar index continued its habitual decline since the end of September and re-entered the downward channel range. Since the beginning of this week, there have been twists and turns in the new round of fiscal stimulus package in the United States, the progress of Brexit trade negotiations between Britain and the European Union has been slow, the IMF has raised the growth rate of the US economy, the dollar index has rebounded sharply at 93 points, and the price of gold has fallen, but the surge in sterling has dragged down the dollar index, the price of COMEX gold has fluctuated around 1900 US dollars per ounce, and the Shanghai Gold 2012 contract remains at the 400RMB / g mark.
Recently, inflation expectations in the United States have cooled. On the one hand, the epidemic in the United States has rebounded, the new round of fiscal stimulus plan in the United States has been shelved, and the recovery of the US job market has been less than expected; on the other hand, international crude oil prices have been depressed and The spread between (TIPS), a five-year US inflation-protected bond, and regular five-year Treasuries, known as the TIPS break-even inflation rate, has fallen significantly since September. The TIPS break-even inflation rate has fallen to 1.52 per cent from a peak of 1.69 per cent at the end of August.
Fed expansion began to stagnate after peaking in early June, and there is limited room for further easing of Fed monetary policy. In this context, the new round of US fiscal stimulus package is the key to boosting the US economy and raising inflation expectations, but the US fiscal stimulus policy is deadlocked before the US presidential election day, which appears to be a difference in scale between the two parties in the United States. its essence is the intensification of the game between the two parties before the US presidential election. In the later stage, the possibility of reaching a stimulus bill in the United States before the US presidential election is reduced, US inflation expectations are weakening, and US real yields are higher, which is a drag on the trend of gold prices.
From the perspective of real interest rates, the current real interest rates are the key to driving gold prices. At present, the yield on 10-year US bonds is about 0.73%, and nominal interest rates in the United States remain low, but due to the impasse in the talks on fiscal stimulus in the United States, inflation expectations have been hampered, which has suppressed the downward expectations of real interest rates. Given that the Fed is unlikely to make significant interest rate cuts and table expansion in the short term, it is difficult for 10-year Treasury yields to return to the downward trend, which means that if inflation expectations do not recover effectively, there is little room for real interest rates to fall this year and next, and the rebound in gold prices will be limited.
The latest data released by the World Gold Council show that the global gold ETF has achieved a net inflow for ten consecutive months. Since the third quarter, institutions have seen a relatively significant increase in their positions in gold ETF, with a 7.6 per cent increase in gold ETF positions. Since October, SPDR gold ETF, the world's largest gold fund, has increased its positions by 9 tons to 1278 tons, while CFTC gold's non-commercial net long positions have increased for two consecutive weeks since the end of September, with a cumulative increase of 29527 lots to 248587 lots, of which long positions increased significantly by 12000 lots, while short positions decreased by 17000 lots. Recently, gold prices fluctuated obviously, but institutional positions did not decline significantly, indicating that institutions are still bullish on gold.
The investment attribute of gold can support the price of gold. In the fourth quarter, with the stabilization of US stocks and the accumulation of political risks in Europe and the United States, the safe haven demand for gold is expected to rise. In the short term, fundamentals are intertwined and gold prices are expected to remain oscillatory. Shanghai gold below the first support 380 yuan / g, while the top is still possible to return to 450 yuan / g. In the medium term, the logic supporting the rise in gold prices still exists, and before the US dollar reaches the reversal condition, there is limited room for adjustment in dollar-denominated gold prices. If a new round of US fiscal stimulus can be launched by the end of this year, gold prices are expected to break through all-time highs.
