SMM News: precious metals encounter "Black Monday" again, a vaccine news set off global risky assets, US stocks hit a new high, crude oil led commodities rose sharply, while precious metals were suppressed, the newly established rally reversed again, and the international gold price plummeted by $100,000,000 to engulf all recent gains.
The vaccine is hard to quench the thirst by sending charcoal in the snow.
Recently, the number of novel coronavirus diagnosed in the world has exceeded 50 million, with repeated new highs in a single day. The United States has had more than 120000 cases for many days in a row, and some European countries have adopted new blockade measures one after another. French President Macron announced that the entire territory of France would be closed from October 30, and German Chancellor Angela Merkel said that new blockade measures would be adopted from November 2. British Prime Minister Johnson said that the second comprehensive blockade would be imposed in England from November 5 until December 2.
At a time when the spread of the novel coronavirus epidemic seemed unstoppable, Pfizer announced that the novel coronavirus vaccine candidate had made significant progress in phase 3 clinical trials, with the preventive effectiveness of the vaccine as high as 90%. It is estimated that 50 million doses of vaccine will be supplied by the end of this year and will increase to 1.3 billion by the end of 2021. When the worries caused by the epidemic gradually accumulated, the sudden vaccine news, such as providing charcoal in the snow, immediately triggered capital intervention, and the across-the-board decline in assets such as US debt, Japanese yen, Swiss franc and gold showed that risk aversion had receded. The collapse in precious metals is similar to the market shock caused by the news of the Russian vaccine in mid-early August, and the subsequent reversal is reasonable. There is still a long way to go before the vaccine goes to market, and there are still many obstacles to mass vaccination that need to be removed, the hype of the vaccine by capital is difficult to continue, and the weak economy still needs to rely on monetary and fiscal policy to provide a substantial boost. Vaccines can not change the global super-loose policy path, and gold prices still have a turn for the better.
While global easing is going on, the trend of the United States is still the main line.
In the face of the intensification of the epidemic, recent monetary policy statements from major central banks show that a new round of global easing is under way. The ECB's latest interest rate decision left the three key interest rates unchanged, and Lagarde said the ECB would take action in December, possibly expanding bond purchases. RBA interest rate decision to cut the benchmark interest rate and three-year bond yield target from 0.25% to 0.1%, and said it would implement a new round of A $100 billion QE program. The Bank of England left interest rates unchanged and the total amount of central bank asset purchases increased by 150 billion pounds to 895 billion pounds.
Last week, the Fed maintained a dovish statement at its interest rate meeting, leaving interest rates unchanged and reiterating its commitment to use all tools to support the US economy. Buy Treasuries and mortgage-backed bonds at least at the current pace, and the Fed will be prepared to adjust its monetary policy stance appropriately if there are risks that could hinder the achievement of the Fed's goals. Chairman Powell said at a news conference that the slowdown in labor market growth may require further support from monetary and fiscal policies. Although there has been a lot of noise but no action since the Fed set its average inflation target in August, it only lowered the main street lending threshold at the end of October to help small businesses tide over the difficulties. If the fiscal plan continues to struggle, then the likelihood of adjustment by the Fed will be increased.
Biden's election is imminent, and once the dust of the election is settled, the stimulus package will once again become the focus of market bets. At present, if the blue wave of the Democratic Party fails to materialize and the two houses remain divided, there will still be a lot of resistance to the progress of the stimulus package, and it is uncertain whether it can be introduced before the inauguration of the president on January 20.
Gold is under short-term pressure and the medium-term bullish logic remains unchanged.
Treasury yields have climbed rapidly to their highest level since March, but under current policy constraints, the space above nominal interest rates is expected to be limited. In the future, it is still optimistic that a slow rise in inflation will lead to a decline in real interest rates, and the logic of gold's medium-term rise has not fundamentally changed. Data from the World Gold Council show that there has been a net inflow of global gold ETF for 11 consecutive months, increasing its holdings by 1022 tons to 3899 tons in the first 10 months of this year, indicating that capital is still bullish on gold prices in the medium to long term. The election process is not over, Trump wants to seek a reversal through legal means, the market is in a sensitive period in the current political and economic situation, any changes may cause waves, precious metals continue to face the risk of two-way sharp fluctuations, pay attention to the technical trend. The rally that gold just established last week has been broken by Monday's overcast line, and the international gold price will test the effectiveness of $1850 support, and once it falls below, it may continue to slide to $1800 or lower. If we can stand firm at the key support level, we are expected to regain the upward trend. It is recommended that precious metal leveraged trading is mainly short-term for the time being, while non-leveraged assets such as ETF maintain a pullback strategy to focus on long-term earnings.
(Liu Dongbo, senior analyst at Anxin Research Institute)
