Content summary
International precious metals fell collectively last week, with London platinum leading the decline by 6.52 per cent and Loco-London gold closing down 2.81 per cent. The core logic of the market is that expectations of economic recovery will lead to a relay rise in real interest rates and the dollar index, putting double pressure on gold. In the first stage, with nominal interest rates rising and inflation stable, real interest rates rebounded quickly and continued to hit gold; in the second stage, good macro data boosted the dollar index, putting further pressure on gold. In terms of regional logic, gold investment and speculative demand weakened, driving gold prices down. Looking ahead, we need to pay more attention to the impact of the trend of US dollar real interest rates on gold. The probability of extreme risk in real interest rates in the US dollar is not high, but there is also room for further rebound, and gold will remain under pressure in the short term. Technical graphics show that the gold price will also fluctuate downwards in the future, although it may be accompanied by a technical rebound, but it does not change the general direction, it is recommended to pay attention to the 1700 integer support level.
Base metals were mixed last week. On the macro front, Federal Reserve Chairman Colin Powell reiterated his easing position last week, easing market concerns about the possibility that the Fed may tighten monetary policy ahead of time as a result of rising inflation. In terms of the epidemic situation, with the development and accelerated promotion of vaccines in various countries, the number of new novel coronavirus infections in the world has gradually decreased. Taking into account the uneven global distribution of vaccination, the unequal development of demand and supply is expected to provide support for the rise in the price of non-ferrous materials. Lun copper surged high last week, and on the supply side, the shortage pattern of copper mine supply is difficult to improve in the short term, and the tight upstream supply plays an obvious role in supporting copper prices; on the demand side, the domestic and foreign markets are divided. With the landing of a new round of large-scale stimulus in the United States, the stacked mine end is still tight, exchange inventories remain low, and copper prices will remain upward in the medium to long term. However, the spot market has not yet seen a clear recovery in the near future, the concentration of long positions in the futures market has increased moderately, and may face a pullback in the short term, which can be bought on bargains.
On the energy front, oil prices rose sharply last week due to multiple profits and factors, with the two major crude oil futures prices hitting a 13-month intraday high before the rally was suspended. On the one hand, the super-expected cold wave in the United States hit the US energy industry, causing a sharp drop in US crude oil production and supporting oil prices. EIA data showed that US crude oil production fell by more than 10% last week, or 1 million barrels per day; on the other hand, the global novel coronavirus vaccination accelerated, economic expectations continue to rise, and the Democratic Party of the United States is trying to promote more fiscal stimulus policies, which also further push up oil prices. Looking forward to the future, oil prices will rise sharply in the early stage and face the risk of a correction in the short term, but the range may not be too large. Brent oil prices may fluctuate around $65. In view of the rebound in oil prices, OPEC+ may begin to relax restrictions on the supply of crude oil market from April. Next week, it is suggested that we should focus on the news related to the OPEC+ meeting.
01 precious metal market
International precious metals fell collectively last week, with London platinum leading the decline by 6.52 per cent and Loco-London gold closing down 2.81 per cent.
The core logic of the market is that expectations of economic recovery will lead to a relay rise in real interest rates and the dollar index, putting double pressure on gold.
In the first stage, with nominal interest rates rising and inflation stable, real interest rates rebounded quickly and continued to hit gold. In terms of nominal interest rates, yields on medium-term Treasuries moved up overall, spurred by weak demand for Treasury auctions. Last Wednesday's $61 billion tender ratio for five-year Treasuries was the second lowest in the past decade, pushing yields on five-and 10-year Treasuries above key levels. As a result, the MBS market focused on "convex hedging", selling long-term US Treasuries, exacerbating the selling pressure on US Treasuries, with 10-year US Treasury yields hitting as high as 1.6085 per cent in intraday trading. In terms of inflation expectations, high volatility will be maintained in the short term. Inflation expectations of more than 2 per cent have reached a fully priced level, and then wait for actual inflation to move closer to expectations. The recent sharp rise in the prices of industrial raw materials and agricultural products can be seen as a process in which real inflation catches up with expectations. It should be cautioned that the rise in early inflation expectations is mainly driven by the recovery of US consumer demand ahead of supply, and inflation expectations are likely to be revised as supply catches up. In addition, although Biden's $1.9 trillion stimulus package was approved by the House of Representatives in the early hours of Saturday, a step closer to landing, some "water release" funds will divert to push up the savings rate due to changes in the behavior of US residents during the epidemic, and the pulling effect on inflation is expected to be discounted.
In the second stage, good macro data boosted the dollar index, putting further pressure on gold. The number of U.S. jobless claims released last week and the University of Michigan consumer confidence index in February were better than expected. Morgan Chase also recently raised its forecast for US economic growth in 2021 to 6.2 per cent from 4.2 per cent. On the back of optimistic economic expectations, London gold hit 1717.35 late Friday, setting a more than eight-month low.
In terms of regional logic, gold investment and speculative demand weakened, driving gold prices down. Global gold ETF positions have recorded 10 consecutive declines, accelerating to 3240 tons last week, while CFTC speculative net long positions in gold also widened the decline, down 8.2% month-on-month last week.
Looking ahead, we need to pay more attention to the impact of the trend of US dollar real interest rates on gold. Judging from recent statements by Fed officials, the Fed has repeatedly stressed that it will not scale back its bond purchases in the short term, but shows no sign of interfering with the rise in nominal interest rates, interpreting the recent rise in nominal interest rates as a result of economic improvement. As a result, the Fed is not expected to come up with tools to curb the rise in long-end yields in the short term-yield curve control (YCC) and distortion operation (OT). At the same time, the Fed, as the MBS holder with a considerable market share, lacks the incentive for "convex hedging" and will not contribute to the rise in US bond yields. Overall, the probability of extreme risk in dollar real interest rates is not high, but there is room for further rebound, and gold will remain under pressure in the short term.
Technically, gold has been suppressed by the middle track of the Bollinger belt for nearly a month, and has now fallen to the lower track of 2 sigma in the Bollinger belt, and is close to the oversold range of the RSI index. Gold prices are expected to fluctuate downwards in the future, although it may be accompanied by a technical rebound, but it does not change the general direction, it is recommended to pay attention to the 1700 integer support level.
02 basic metal market
Last week, the non-ferrous metal plate was mixed, with the exception of Lun Copper and Lun Aluminum rising 0.66 per cent and 0.98 per cent to $9000 and $2157 per ton, respectively, while Lunni led a decline of 5.57 per cent to close at $18555 per tonne. Lun lead, Lun tin and Lun zinc fell 3.91 per cent, 3.18 per cent and 3.02 per cent, respectively. The London Metal Futures Index ((LMEX INDEX)) edged up 0.16%.
At the macro level, the trend of global monetary policy easing remains unchanged, providing continued support for non-ferrous prices. Last week, Federal Reserve Chairman Colin Powell reiterated that the economic outlook is uncertain and that interest rates will remain low for a long time, easing market concerns about the possibility that the Fed may tighten monetary policy ahead of time as a result of rising inflation. Biden's 1.9 trillion stimulus package successfully passed the House vote, coupled with Trump's early 90 million temporary stimulus package, this large-scale stimulus package is expected to boost further strong economic growth. Since the beginning of this year, monthly economic data from Europe and the United States have shown strong growth in the manufacturing sector, especially at a time when the epidemic is still serious. The latest barometer of global trade in goods released by the World Trade Organization ((WTO)) is higher than the benchmark and the previous period, indicating that the volume of global trade has gradually recovered and the global manufacturing industry is gradually returning to its pre-epidemic level. Next, this week, we will focus on the impact of the relevant policies in the 14th five-year Plan and the 2035 Vision Plan on the non-ferrous sector.
With regard to the epidemic, according to Worldometer data, as of 06:30 on February 28th in Beijing, there were a total of 114 million confirmed cases and 2.53 million deaths worldwide, with 410000 new confirmed cases in a single day and more than 70,000 new cases in the United States in a single day. With the development and accelerated promotion of vaccines in various countries, the number of new novel coronavirus infections in the world is gradually decreasing. It is reported that 92% of the global vaccine dose is being used in countries classified by the World Bank as "high income" or "upper-middle income". Accounting for about half of the global population, given the uneven global distribution of vaccination, the unequal development of demand and supply will support the rise in the price of non-ferrous materials.
[copper]
Last week, Lunar Copper continued its upward trend before the Spring Festival, touching previous highs in the first two working days. Although there has been a pullback since Wednesday, the non-ferrous plate represented by Dr. Copper still has the momentum to continue to rise, both at the macro level and at the fundamental level. In the context of the flood of global liquidity, the financial attribute of copper will be significantly strengthened.
On the supply side, the shortage pattern of copper supply is difficult to improve in the short term. Recently, it has been reported that large international enterprises represented by Glencore are increasing investment in mines, but due to the long investment cycle, mines often take about 10 years from investment to output. At present, the mine end is still disturbed and still tight, and the spot processing fee for imported copper concentrate has fallen to an all-time low of US $40 / tonne, and the shortage of upstream supply plays an obvious role in supporting copper prices. In terms of demand, the domestic and foreign markets are divided. After the Spring Festival, domestic demand is still in the seasonal off-season, and the performance of spot orders is mediocre. According to market news, some spot enterprises are not willing to ship goods under the influence of high copper prices, and most of them maintain rigid demand. The accumulation of stocks downstream is lower than market expectations. On the other hand, with the improvement of the global epidemic, overseas demand expectations continue to rise. In particular, the current market expectations for the future "carbon peak" and "carbon neutral" copper demand is particularly positive.
In terms of exchange data, LME increased by 500 tons over last week, but it is still at a historically low level. Although SHFE has some accumulation after the holiday, it is not as good as the level of the same period in previous years, with an increase of 35000 tons over the same period last year, an increase of 4000 tons in COMEX, and a total increase of 39500 tons in global exchange inventories over last week. In addition, COMEX copper speculative net long position level is still at an all-time high, there is no obvious pullback trend. LME forward curve, spot than three-month rising water rose from $40 / ton last week to $65 / ton, affected by the spot tension, the near-end curve is steeper, or will support copper prices continue to rise.
At present, the main risk points in the market are, first, the control of the epidemic is lower than expected, second, the tightening of monetary policy beyond expectations, and third, the uncertainty of Sino-US relations. Generally speaking, the overall operating logic of the current copper market has not changed significantly, still taking overseas easing and global economic recovery as the main line. With the landing of a new round of large-scale stimulus in the United States, the stacked mine end is still tight, exchange inventories remain low, and copper prices will remain upward in the medium to long term. However, the spot market has not yet seen a clear recovery in the near future, the concentration of long positions in the futures market has increased moderately, and may face a pullback in the short term, which can be bought on bargains.
03 energy market
Two major crude oil futures prices hit an intraday high of nearly 13 months, and then the rally was suspended. The rise in oil prices last week was mainly supported by these factors: one is that the super-expected cold wave in the United States hit the US energy industry, causing a sharp drop in US crude oil production and supporting oil prices; in addition, novel coronavirus vaccination accelerated around the world, and economic expectations continued to rise, pushing up oil prices; in addition, the Democratic Party of the United States worked hard to promote more fiscal stimulus policies, and the Federal Reserve continued to maintain its ultra-loose policy. OPEC continues the production reduction policy and is making steady progress towards the goal of reducing inventory. As a result, oil prices have risen sharply under the support of many favorable factors. However, the current rise in oil prices is also constrained by a number of factors. For example, as oil prices rise, the US crude oil industry may invest more, while OPEC+ will gradually increase production.
Cold wave hits oil production in Texas in the United States
A more-than-expected cold wave hit the energy industry in Texas and pushed up oil prices to their highest level in more than a year. Analysts believe that the impact of the cold wave on Texas, the center of the US energy industry, is far greater than expected.
An unprecedented Arctic cold wave continues to affect most parts of the United States, including Texas, the energy center of the United States. As a result, millions of people in Texas have been without power for several days. Texas Electroweb operators say there are still more than half of the state's power outages, which are likely to last for a few more days.
Multiple unfavorable factors such as power outages, equipment icing and pipeline freezing have affected Texas oil producers. The analysis points out that although the oil industry can operate smoothly in some cold climates, Texas producers are not prepared to withstand the cold wave. On the other hand, natural gas production in the United States has also suffered a historic interruption. The decline in natural gas supply has further led to a corresponding reduction in power generation.
The number of active drilling rigs in the United States fell for the first time since November due to cold snow in Texas, New Mexico and other energy production centers.
Biden's 1.9 trillion stimulus package is good for oil prices
Democrats in the U.S. House of Representatives have passed a $1.9 trillion epidemic relief bill, and lawmakers are trying to prevent unemployment benefits from expiring next month.
House Majority Leader John Hoyer issued a statement saying: 'the American people strongly support this bill and we are moving quickly to ensure that it becomes law.
The plan includes $1400 in direct benefits to most Americans, $400 a week in unemployment benefits, and an extension of programs that make millions of Americans eligible for unemployment insurance. The plan will also distribute $20 billion for novel coronavirus vaccination, $50 billion for testing and $350 billion for state, local and community government relief. Under the current plan, the federal minimum wage will be raised to $15 an hour by 2025.
Senate Majority Leader Schumer expects the Senate to approve the bill by March 14 and submit it to President Biden for signature. The plan will increase unemployment benefits by $300 a week, cover odd workers and self-employed workers, and extend the number of weeks of unemployment benefits.
Us crude oil production plummets due to winter storm
Us crude oil production fell by more than 10 per cent last week, or 1 million barrels a day, as a result of a rare winter storm in Texas, according to the US Energy Information Administration ((EIA)).
Data show that US EIA crude oil inventory increased by 1.285 million barrels in the week ended February 19, with an expected decrease of 6.5 million barrels, and the previous value decreased by 7.257 million barrels; EIA refinery inventory decreased by 4.969 million barrels, expected to decrease by 4 million barrels, and the previous value decreased by 3.422 million barrels; and EIA gasoline inventory increased by 12000 barrels, expected to decrease by 3.5 million barrels, and the previous value increased by 672000 barrels.
Crude oil production may rise to limit the rise
At present, the OPEC+ organization has reduced production by 7.1 million barrels per day, accounting for about 7 per cent of the world's crude oil supply. However, some media quoted OPEC+ sources as saying that in view of the rebound in oil prices, the OPEC+ may start to relax restrictions on crude oil market supply from April, but any increase will be a small increase because oil-producing countries are worried about new obstacles during the fight against COVID-19 's epidemic.
Us crude oil production is also likely to rise. Because of higher oil prices, American producers began to increase production. The number of oil rigs in the US rose to its highest level since May the previous week, according to oil service company Baker Hughes. Us oil production fell sharply in 2020, but is expected to pick up or even set a new record in just two years, the US Energy Information Administration (EIA) said in its much-anticipated annual energy outlook (AEO2021). Us oil production will exceed the average annual output of 12.25 million b / d reached in 2019 in 2023, EIA said.
As far as the current market is concerned, short-term oil prices will fall in the range of $60 to $70.
Oil prices have risen sharply in the early period and face the risk of a pullback in the short term, but the range may not be too large, and Brent oil prices may fluctuate around $65. In view of the rebound in oil prices, OPEC + is likely to ease supply restrictions on the crude oil market from April. Saudi Arabia also intends to announce at the OPEC+ meeting on March 4 that it will withdraw its voluntary additional 1 million b / d production reduction and increase production as early as April. Next week, it is suggested that we should focus on the news related to the OPEC+ meeting.
