SMM Network News: the trading logic of precious metals has changed from monetary policy easing to fiscal policy. Since the end of September, as the US election day approaches and the negotiation process of the fiscal stimulus package is repeated, the market has been obviously affected by the news, and precious metal prices have fluctuated strongly. On Wednesday, the speaker of the US House of Representatives said it was possible to reach an agreement with the Treasury Secretary on a stimulus package to deal with the impact of the novel coronavirus epidemic, but may not be able to get both houses of Congress through before November 3. White House aides say the Trump administration is seeking a $1.9 trillion bailout bill, markets have raised expectations for fiscal policy, and precious metals prices have risen sharply again.
Judging from the current negotiation process, the probability of reaching a consensus between the House of Representatives and the Treasury is high, but even if the two parties reach an agreement, there will still be many obstacles to the approval of the Senate. The Senate majority has previously warned the White House not to agree to anything similar to what Pelosi supports. Former presidential candidate Mitt Romney and several Republicans said they would vote against any plan worth $1.8 trillion or more, with both the Treasury Department and the House of Representatives proposing proposals worth more than $1.8 trillion. In addition, with the US election approaching, the tug-of-war between the two parties over the fiscal stimulus package has intensified, and negotiators of the two parties have reached a stalemate on key issues such as bailing out state governments and protecting corporate responsibility. the probability of implementing the stimulus package before the election is expected to be low.
Regardless of the outcome of the election, the US economy is still weak. Judging from the beige book on the economic situation released by the Federal Reserve, the economic recovery is still continuing, but by a small margin. Economic activities in different industries vary greatly, with prices rising moderately in different regions. As a result, the final fiscal stimulus package will still be in place, and its size and process will depend on the outcome of the election and the winner of the Senate majority.
The result of the election and its impact on gold prices may present the following three scenarios: scenario one is that Trump is re-elected and the two parties are in charge of both houses of Congress. In this scenario, the United States will continue the current political situation with less impact on the market. The fiscal stimulus package will still be in a tangled state, but the probability that it will eventually pass is still high, and the precious metals will oscillate and strengthen. The second scenario is that the Democratic Party has won a resounding victory, and the fiscal stimulus package proposed by the Democratic Party is on a higher scale. in this case, the fiscal package will be passed quickly and the precious metals will rise sharply in the short term. ?? Scenario 3 is the election of Democrat Joe Biden, the two parties control both houses of Congress, and precious metals rise slightly in a short period of time.
From the performance of precious metals during the US election over the years, we can see that gold prices will fluctuate sharply from late October to November. We believe that in the context of the delay in the release of the results of this election, and Trump may not recognize the results of the election,?? The probability that the fiscal stimulus package can be implemented in the short term is low, and the possibility of an upward breakthrough in precious metal prices is small. However, with the support of monetary policy, the downward space of precious metals is limited and the support is obvious. In the short term, the price of gold will fluctuate violently around the $1900 / oz mark.
For the medium-and long-term trend of precious metals, we maintain the bull market view unchanged. In the coming year, the high debt of the United States and the monetization of debt in the future are external manifestations of the decline in the relative competitiveness of its economy. The huge debt of the United States will reduce the credit of the US dollar, and investors will have to look for other alternatives-gold. As a result, gold prices are expected to break the August record of $2067 an ounce again in 2021.
