SMM: spot gold rebounded slightly on Monday to $1803.33, up 0.26%.
On Friday, buoyed by Redsevir's ability to reduce the risk of death, the market partly digested the surge in US cases, causing gold to close slightly below $1800, while there was also some profit selling and some pressure on gold prices in the short term as gold's ETF positions topped 1200 tonnes.
But overall, gold is still trading around $1800, showing resilience. With the recent intensification of the second spread of the epidemic, many countries and regions around the world have resumed the blockade, and there are signs that US economic data have rebounded again after only two months of recovery, adding to the downward pressure on the economy. So unless there is rigorous data to prove that the vaccine has made significant progress, gold will maintain a volatile upward trend in the near future.
The three major central banks will announce interest rate decisions this week, as the market bet that the Federal Reserve will continue to implement ultra-loose monetary policy to support the economy. The market will look for clues to the direction of global central bank policy in the interest rate decisions of the Bank of Japan, the Bank of Canada and the European Central Bank this week. Meanwhile, the US earnings season kicked off this week.
According to the KITCO gold market survey on the trend of gold this week, nearly 90% of analysts are bullish on gold prices this week. But some analysts say a short-term correction is normal because of overcrowded trading and profit-taking, but bulls are expected to re-enter the 1780-1765 range.
The vaccine hopes to put pressure on the gold price again, but the overall impact is limited because the market needs to see more rigorous experimental results.
Us stocks rose on Friday, boosted by Redsevir's ability to reduce the risk of death, allowing the market to partly absorb the surge in u.s. cases, with the s & p 500 up 1.0% at 3185.04; the Dow Jones industrial average up 1.4% at 26075.3; and the NASDAQ up 0.7% at 10617.44.
Gilead Science said on Friday that an analysis showed that its antiviral drug redaciclovir helped reduce the risk of death in critically ill patients.
Redsevir is at the forefront of the global fight against new crown virus disease after another US government trial in April showed that RedSivir could help shorten the time it takes to recover from hospitalization. According to Gilead, the analysis showed that by the 14th day, 74.4% of patients treated with Redcivir recovered, compared with 59.0% of patients using traditional standard therapy.
Affected by a slight rebound in market risk sentiment, gold fell slightly on Friday, closing slightly below the $1800 mark.
Considering that the biggest uncertainty of the current global economic recovery lies in the progress of the epidemic, it is necessary to pay close attention to the relevant news in the near future.
At present, there are more than 150 vaccines under development around the world, and news of progress in research and development has emerged since April, but the boost to market sentiment is expected to be limited before achieving substantial results. So although gold fell slightly on Friday, it remained around $1800 overall.
The clinical trial of the world's first new crown vaccine ended with success at Moscow's Sechenov first Medical University, Russian scientists said on Sunday.
At the same time, Gilead also said that although Redcivir helps reduce the risk of death in critically ill patients, rigorous clinical trials are needed to confirm its effect. So recent news about vaccine progress will cause gold prices to fluctuate slightly until more rigorous experimental results come out.
Gold ETF positions fell slightly for two consecutive trading days, but the total position remained above 1200 tons.
Gold ETFs data showed that as of July 10, the world's largest gold ETF-SPDR Gold Trust held 1200.46 tons of gold, down 0.36 tons from the previous trading day.
As gold ETF broke through 1200 tons, pushing gold prices to a near nine-year high, there was some profit selling in gold for a short time, which made gold ETF positions fall slightly for two consecutive trading days, but remained above 1200 tons, highlighting market interest in gold.
So even if there is more profit selling in the short term, the overall decline is expected to be limited.
The second spread of the epidemic accelerated, and more countries and regions resumed blockades to support gold prices.
Although market sentiment was boosted by the news that Redsevir reduced the critical mortality rate, due to the lack of rigorous experimental evidence, the increased risk of a second spread of the epidemic, and the fact that more states were forced to restart the blockade because of the intensification of the epidemic, concerns in the market are high, and if the spread of the epidemic accelerates in the near future, it could lead to further inflows of funds into safe havens.
According to Worldometer real-time statistics, there are more than 13 million confirmed cases of new crown pneumonia worldwide, reaching 13016744 cases, and a total of 570890 deaths worldwide.
As confirmed cases and hospitalizations continue to increase, restart programs have been suspended in many states in the United States. Some public health experts warn that if the current situation continues, the United States will enter "one of the most unstable periods in history".
The epidemic situation in Latin America and the Caribbean is serious. At present, Brazil ranks second in the world in the number of confirmed cases and deaths, second only to the United States. With the exception of Brazil, the cumulative number of confirmed cases in Peru and Chile exceeded 300000, while Mexico also approached 300000.
At present, the epidemic situation is aggravating in some African countries. The cumulative number of confirmed cases in South Africa broke through the 200000 mark on the 6th of this month, making it the country with the worst epidemic in Africa. South African President Ramafosa said on the 13th that the number of confirmed cases of new crown pneumonia has surged, with 12000 new cases a day, bringing the cumulative number of confirmed cases to 276242, extending the state of national disaster to August 15.
Australia is also showing signs of a rebound in the epidemic, forcing the Australian state of Victoria to resume phase III restrictions on Melbourne and Mitchell counties. The blockade will take effect at midnight local time on the 8th and will last at least six weeks.
With the accelerated spread of the epidemic and the imposition of blockades by more countries and regions, this will continue to support gold prices for some time to come.
The recovery of the US economy for two months in a row may not be sustainable.
Although expectations of a US economic recovery have been an important factor in putting pressure on gold prices, there are signs that the previous economic recovery has shown clear signs of slowing as the effect of policy stimulus fades and the risk of secondary spread of the epidemic intensifies. This will have a negative impact on the global economy.
Data on Friday showed that the US producer price index fell unexpectedly in June, dragged down by falling food costs. According to a Bloomberg survey, the US economy is expected to contract by 32.6% in the second quarter.
Analysts point out that there are five real-time economic indicators that show that the pace of recovery from recession in the United States is slowing, and that only two months after the economy rebounded, there are signs of weakness.
First companies are back to work and job growth is stagnant, especially in states where epidemics such as Florida and Texas are rampant.
Second, the Dallas Fed released a real-time census that uses current census data to measure the percentage of Americans at work. As a result, the figure began to level off recently after rebounding in May.
The third restaurant closed in March across the United States because of a government epidemic blockade and consumers staying at home. Restaurant bookings on Open Table, an online booking system, rebounded in May and the first half of June, but began to decline in the weeks that followed.
Fourth, the New York Fed began publishing weekly indices in April to assess the state of the economy during the epidemic crisis in a more timely manner. The data include same-store retail sales, consumer confidence, first-time unemployment insurance applications and steel production. The data showed a sharp rebound in May and early June, but analysts included the index as an indicator of worsening performance.
Fifth, according to data collected by the Census Bureau's Household Pulse survey in late June, nearly 1/10 mortgage households failed to repay their last loan, and 16% of survey respondents expressed concern that they would not be able to pay their next mortgage.
Neil Dutta, head of economic research at Renaissance Macro Research, said: "five real-time data from the government and the private sector show that the economy looks worse. But he also said the summer pause was unlikely to turn into a long-term decline, but rather a sign that the recovery was ladder-like and accompanied by a pullback.
This week is data intensive. This week looks at June US CPI data released on Tuesday, US industrial production data for June on Wednesday, and US retail sales data for June on Thursday.
At the same time, the beginning of this week will be the beginning of the earnings season in the United States, which may present a bleak picture of the economy.
"although global stock markets completely ignored the deterioration of the global economic situation in the last quarter, the results of the second quarter are bound to reveal a greater impact of the epidemic when the US earnings season begins," said analysts at Capital Macro. Compared with the previous quarter, this may be one of the worst earnings seasons on Wall Street. It remains to be seen whether market participants have the appetite to digest these desperate numbers. "
The United States will continue to maintain easing to support the economy, following the decisions of the three major central banks this week for clues to global easing.
With the economic recovery stalling and the secondary spread of the epidemic intensifying, analysts believe that US monetary and fiscal policy is still expected to continue to ease the bottom in the second half of this year, and may intensify again if necessary.
According to the statement made by the Federal Reserve at the FOMC meeting in June and the slowdown in the pace of economic recovery caused by the rebound in the epidemic in the United States, CICC Macro expects that the Federal Reserve will continue to maintain a monthly QE (treasury bonds and MBS purchases) rate of at least $120 billion in the second half of this year, and gradually implement its total credit policy of $2.6 trillion.
It expects the Fed to maintain sufficient policy flexibility to keep most policy instruments on standby and to adjust the pace of policy accordingly if the situation changes, including the possibility of re-accelerating QE purchases, relaunching dollar swaps and buybacks, and speeding up the release of the alphabet.
In addition to the Fed, the Bank of England is expected to raise expectations of interest rate cuts, with interest rate futures linked to three-month sterling Libor showing negative interest rates by March 2022.
This will also continue to support gold prices as global easing is expected for some time to come.
The Bank of Japan, the Bank of Canada and the European Central Bank will each announce interest rate decisions this week, from which the market will seek clues to the next policy direction of the global central bank. Gold prices are also expected to be supported if other central banks also suggest that they will remain loose for a longer period of time.
Increased risk of global corporate and national debt default
A new study of 900 companies estimates that companies around the world will have as much as $1 trillion in new debt in 2020 in response to the epidemic.
This unprecedented growth will push global total corporate debt by 12 per cent to about $9.3 trillion, and coupled with years of debt accumulation, the world's highest-indebted corporate debt is equivalent to the debt levels of many medium-sized countries.
Global corporate bonds also surged 8 per cent last year, driven by mergers and acquisitions and corporate financing for share buybacks and dividends. But the reason for the huge increase in debt this year is completely different-protective measures have been taken as a result of the epidemic eroding profits. "the epidemic has changed everything," said Seth Meyer, portfolio manager at Janus Henderson, a company that analyzes the new corporate debt index. "it's about saving capital and strengthening the balance sheet."
Companies raised $384 billion from the bond market between January and May, and Meyer estimates that "high yield" corporate bonds with higher risk and lower ratings have hit a new record in recent weeks.
Gopinas, chief economist of the (IMF) of the International Monetary Fund, and Jasper, director of the Bureau of Financial Affairs, pointed out in a paper that the fiscal expenditure of countries in response to the new crown epidemic has made the global public debt reach an all-time high, accounting for more than 100 per cent of GDP. The so-called public debt is mainly national debt. If the total debt level is taken into account, it exceeded 250% last year and is expected to exceed 260% this year. Among them, the United States is typical, the US national debt has reached 26.2 trillion US dollars, while the GDP is only 21 trillion US dollars, accounting for more than 120%, and Japan's national debt accounts for 300% of GDP.
With the surge in global debt, most developing countries are at high risk of default.
The trade situation between the United States and Europe also partly supported the price of gold.
The Trump administration said on Friday that the new digital services tax on France would impose a 25 per cent tariff on French imports, but the implementation of the new tariff would be delayed by up to 180 days.
The (USTR) of the Office of the United States Trade Representative said the move would affect French goods such as cosmetics and bags. The office said that delaying the implementation of tariffs would provide more time to resolve the problem, including through discussions with the Organization for Economic Cooperation and Development (OECD).
A previous US Section 301 investigation concluded that French taxes discriminated against Google, Facebook and Apple.
Since the beginning of this year, the United States and the European Union have fought fights over trade issues over issues such as digital taxes and Airbus subsidies. As the epidemic spreads, trade tensions between the US and Europe are likely to further slow the prospects for recovery.
KITCO Gold Survey: nearly 90% of analysts are bullish on gold prices this week
With the gold station above the $1800 mark, Wall Street analysts and main Street say don't expect the uptrend to change.
According to the weekly Jintuo gold market survey, 15 of the 17 Wall Street professionals, or 88%, think the price of gold is rising. Two analysts, or 12%, think gold will fall. No analyst thinks gold will move sideways this week.
A total of 1610 votes were cast in the main street survey. Of these, 1078 (67 per cent) thought gold would rise. Another 300, or 17%, thought gold would fall, while 232, or 14%, thought there would be horizontal consolidation.
Afshin Nabavi, head of trading at MKS (Switzerland) SA, said: "it would be healthy to make a correction at the current level, but there is no reason to sell gold at the moment. As the global economy worsens, the gold market looks healthy. "
Charlie Nedos (Charlie Nedoss), senior market strategist at (LaSalle Futures Group), a Lassar futures group, said the weak dollar and room for further decline would be good for gold.
Nedoss added that he was bullish on gold as gold continued to rebound from its bullish 10-day moving average.
Adrian Day, chief executive of Adrian Day Asset Management, said he was bullish on gold, but also expected some pullback. "as long as money continues to flow into gold, gold will continue to rise. We don't think anything can stop the influx of money. "
Colin Cizansky (Colin Cieszynski), chief market strategist at Singapore Airlines Wealth Management (SIA Wealth Management), said not only the technical momentum of gold points to higher prices, but also the interest rate decisions of the three major central banks are likely to support gold.
He added that the Bank of Japan, the Bank of Canada and the European Central Bank are expected to reaffirm their commitment to supporting the global economy.
But not all analysts are bullish on precious metals. Frank McGhee, a precious metals trader at Alliance Financial, says he is bearish on gold because trading is starting to look a little crowded.
Lukman Otunuga, a senior research analyst at FXTM, is another bearish Wall Street analyst. As gold breaks through the $1800 mark, the market could be hit by some major profit-taking, he said.
"after rising to a level not seen in nine years, gold is likely to experience a technical correction back to the $1780, 765 area before bulls gain new momentum," he said. "
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