SMM: international gold prices rose to $1981.08 / oz in intraday trading yesterday, pointing to the $2000 / oz mark, but then fell back higher and gave up all the gains. Can Taurus continue in the future? Many analysts believe that the short-term profit unwinding may bring a short-term correction in prices, but the rising trend of medium-and long-term gold prices has not changed.
Du Fei, a precious metals researcher at Jinrui Futures, told Futures Daily that the main drivers of the continued rise in precious metal prices are the rebound in inflation expectations driving down real yields on US bonds, the sharp decline in the dollar index and price support brought by risk aversion factors. In his view, the above positive still has some inertia, and will continue to push up the price of gold in the short and medium term.
Looking at the historical "Taurus" market, Xu Ying, a precious metals analyst at the East Securities Derivatives Research Institute, said that the fundamental reason for the gold bull market in the 1970s and after 2000 was that the US economy was relatively in a downward stage. the expansion of the trade deficit and fiscal deficit eroded the credit of the US dollar, and the price of gold against the US dollar was revalued and rose sharply.
She said that for now, the US economy has fallen into recession, and it will take a long time for the economy to recover with a surge in fiscal deficits, deepening negative real interest rates and a weakening dollar. At the same time, in the process of economic recovery, it is difficult for loose fiscal and monetary policy to exit quickly, it will be difficult for the Fed to raise interest rates until at least the end of 2022, and it will further expand its balance sheet by buying assets, so the continuation of the gold bull market is relatively certain.
As for the duration of the bull market, du Fei believes that attention needs to be paid to the epidemic situation in the United States and the degree of economic repair. "with the second outbreak in the United States, we believe that the control of the epidemic depends on the availability of an effective vaccine, and we can pay attention to this time point at a later stage."
It is worth noting that the Fed's monetary policy meeting from July 28 to 29 will send the next policy signal, and the market generally expects this interest rate decision to keep the interest rate range unchanged. In du Fei's view, the main purpose of the Fed's adjustment of benchmark interest rates is to maintain low unemployment and control inflation. As the unemployment rate is still high, inflation is still moderate, and the economic distress caused by the epidemic has not gone away, the possibility of the Fed raising interest rates is slim.
"in view of the worsening epidemic in the United States after the interest rate meeting in June, the momentum of economic recovery has been suspended, the job market has weakened again, and consumer activity is under pressure, the Fed is expected to maintain the dovish tone and continue the direction of monetary policy easing." Xu Ying said that the focus of the interest rate meeting was whether the Fed would further strengthen its forward guidance and promised to keep interest rates low for quite a long time.
In Xu Ying's view, the pattern of long-term weakness of the dollar has been determined. After the introduction of ultra-loose monetary policy by the Federal Reserve to solve the problem of dollar liquidity shortage in global markets, the dollar began to rise weakly and gradually. "at present, there is a high degree of uncertainty about the prospects for the recovery of the US economy. A new round of fiscal stimulus is just around the corner, which is bound to aggravate the fiscal deficit, while the Federal Reserve will maintain low interest rates and asset purchases in the next 2-3 years. Along with debt expansion and liquidity release, the dollar will continue to be weak in the medium to long term."
At the same time, the weakening of the dollar index is also affected by the divergence of epidemic performance in Europe and America. Du Fei said that the United States is facing the threat of a second outbreak of the epidemic, and the cumulative number of confirmed cases has exceeded 4 million, an increase of more than 50, 000 a day, making it the region with the worst epidemic in the world. The epidemic in major euro zone countries is under control, and the number of new cases continues to decline. As the economies of major euro zone countries and China gradually recover, the euro and the yuan continue to strengthen, putting pressure on the dollar index.
At present, the recovery of European and American enterprises is also divided. Shi Jialiang, a medium-term futures analyst at founder, said that on the one hand, the effective control of the epidemic in Europe will directly contribute to the rapid economic recovery. The EU's recovery fund plan will not only stimulate faster economic repair, but also boost the confidence of market investors and consumers. In this context, European corporate activities will continue to be improved and repaired. On the other hand, the epidemic in the United States has been out of control since July, causing some states to delay or suspend plans to resume work or production, while the escalation of geopolitical friction has dealt a blow to market confidence and the pace of demand recovery. This will not only lead to a slow recovery in US business activity, but will also be a drag on the economic improvement. However, driven by the government's economic stimulus bill, the overall recovery trend will not change, and the economy of the United States will improve significantly in the third quarter, but not as much as in Europe.
The current ultra-loose economic policy and the strong performance of the euro have put pressure on the dollar. As the global economic recovery continues, if the epidemic in the United States does not improve significantly, the dollar will fall further, and the possibility of falling below the 90 mark cannot be ruled out. The euro and sterling still have room to rise. At the same time, under the combined influence of the risk of a second epidemic, the release of water by global central banks, continued geopolitical tension, and difficult to change the weakness of the US dollar, there is still room for precious metals to rise before and after breaking through. " Shi Jialiang said.
Xu Ying said that weak US economic fundamentals, large-scale fiscal stimulus and unlimited monetary easing have increased the possibility of short-term stagflation in the US economy, adding lingering geopolitical risks. these factors constitute the upward momentum of gold, the $2000 / oz mark is not far away, and the potential correction risk may come from the profit-taking of short-term funds, but the medium-and long-term upward trend has not changed. Du Fei also believes that the short-term closing of many profitable positions may bring a short-term correction in gold and silver prices, but he is still optimistic about precious metals prices under the long-term trend.
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