Home / Metal News / Precious Metals / The Fed is out of control! Will the price of gold still rise? The "Beige Book" spurred the three major US stock indexes to close higher in August. "small non-farmers" data were far less than expected for six consecutive weeks of decline in US crude oil inv
The Fed is out of control! Will the price of gold still rise? The "Beige Book" spurred the three major US stock indexes to close higher in August. "small non-farmers" data were far less than expected for six consecutive weeks of decline in US crude oil inv
Sep 3,2020 08:10CST
translation
Source:Futures daily
The content below was translated by Tencent automatically for reference.

SMM: the latest beige book on economic conditions released by the Federal Reserve on Wednesday eastern time shows that US economic activity has picked up moderately, but economic growth in some areas is still sluggish, and the economy as a whole is still far behind the level before the COVID-19 epidemic. Economic activity has increased in most parts of the United States, with manufacturing growth the most common, according to the beige book.

Stimulated by the positive signal from the Fed's beige book, the three major indexes of US stocks collectively closed higher. The Dow is up 1.58%, the S & P 500 is up 1.53%, and the Nasdaq is up 0.98%.

The world's largest silver ETF--iShares Silver Trust position decreased by 73.57 tons compared with the previous day, and the current position is 17781.5 tons. The world's largest gold ETF--SPDR Gold Trust position decreased by 0.59 tons, or 0.05%, compared with the previous day, and the current position is 1250.04 tons.

Adrian Day, chief executive of Adrian Day Asset Management, said investors did not need to worry about short-term gains and that gold would rise above the $2000 / oz mark by the end of the year.

The dollar index hit a 27-month low this week. The market believes that under the extremely loose monetary policy of the Federal Reserve, the dollar has entered a long-term downward trend. 'The Fed is out of control, and in this case, there is no doubt that gold has gained a lot of support, 'Mr. Day said.

Democratic presidential candidate Joe Biden has called on Trump to ask Congress for emergency funding.

Copper prices hit a two-year high this week as base metals rose across the London market as the dollar weakened and there were more signs of China's economic recovery. The dollar fell to a two-year low after Chinese manufacturing data showed that exports were supporting the economic recovery. Copper stocks monitored by the (LME) on the London Metal Exchange fell for the 14th consecutive day and are now at their lowest level since December 2005. In addition, copper futures prices below spot prices also indicate a short-term supply crunch, with the spread close to its highest level since March 2019.

As the US stock market continues to hit record highs, many investors are turning their attention to the risks posed by the November election. Hedging against potential market volatility is not cheap. In fact, in terms of the common practice of betting on volatility, known as "butterfly trading", it would be the most expensive event risk ever.

EIA crude oil stocks in the United States fell 9.362 million barrels, or 1.8 percent, to 498.4 million barrels in the week to Aug. 28, and the market is expected to decrease by 2 million barrels, or 4.689 million barrels from the previous value.

Crude oil futures closed sharply lower on Wednesday, while US WTI crude oil futures closed at their lowest level in nearly a month. The data show that both domestic crude oil inventories and production in the United States have temporarily fallen sharply. On Wednesday, (WTI), West Texas Intermediate for October delivery on the New York Mercantile Exchange, fell $1.25, or 2.9%, to close at $41.51 a barrel, the lowest closing price since Aug. 7. London Intercontinental Exchange November Brent crude oil futures fell $1.15, or 2.5%, to close at $44.43 a barrel.

The ADP data fell far short of expectations, and the market waited for Friday's "non-farm" data.

20:00 on Wednesday in Beijing, the US ADP employment report, known as "small non-farm payrolls", showed that US ADP employment increased by 428000 in August, far less than the expected increase of 950000, and ADP employment was revised to 212000 in July.

Specifically, employment in the construction sector increased by 28000 in August, compared with a decrease of 8000 in July; manufacturing employment increased by 9000 in August and by 10, 000 in July; trade / transport / utility employment increased by 58000 in August, compared with an increase of 41000 in July; employment in financial services increased by 11000 in August and decreased by 18000 in July. Employment in professional / business services increased by 66000 in August and decreased by 58000 in July.

With regard to the latest employment data, the vice president of ADP Employment data said that the recruitment information in August showed that the economic recovery was slowing, job growth was negligible, and job growth in all sizes and industries was not close to pre-epidemic employment levels.

At present, the market is waiting for the non-farm report to be released on Friday. CNBC reports that ADP data have lagged behind government statistics since the outbreak in March. ADP employment in July was revised higher than the initial estimate of 167000, but still well below the 1.76 million reported by the U.S. Bureau of Labor Statistics ((Bureau of Labor Statistics)).

Forexlive analyst Adam Button commented that ADP employment was revised from 167000 to 212000 in July, a reminder that last month's ADP report also showed a sharp decline, but not in the official data. This may be due to seasonal changes in the pandemic, but not this month. In addition, the number of initial jobless claims in the week of the non-farm survey was also high, so there may be more unease on Friday.

After the ADP employment data, the dollar index fell briefly, hitting as low as 92.52, while spot gold rose short-term, reaching as high as $1967.04 an ounce. But the effect was so short-lived that the market quickly returned to the overall trend before the data, with the dollar continuing to rebound and gold falling.

The dollar has shown a significant decline over a long period of time, but has rebounded since the better-than-expected August ISM manufacturing PMI data released in the United States on Tuesday. However, analysts believe that the rise of the dollar may not be sustainable under the macro background that the Fed is likely to keep interest rates low for a longer period of time.

Shi Jialiang, a researcher on medium-term futures in founder, told reporters that the performance of the US manufacturing industry in the third quarter exceeded expectations, and production and demand continued to improve, indicating that the pace of economic recovery is accelerating, and the renewed deterioration of the epidemic has only affected the extent of the recovery. does not affect the pace of recovery. Looking ahead, the US manufacturing industry still faces many challenges, including high unemployment, the US election, reduced business investment and weak global demand. The continued improvement of the manufacturing industry will show a marginal slowdown, but the whole will still be above the rise and fall line.

He said the Fed's dovish policy shift had dragged down the dollar, with the dollar index falling below 92 to its lowest level since April 2018; however, the better-than-expected PMI performance in the US manufacturing sector in August boosted market confidence and reversed the downward trend of the dollar, allowing the dollar to regain the 92 mark again. However, he believes that the ultra-loose economic policy, negative real interest rates, Fed inflation policy, and the deterioration of US economic fundamentals have made the US dollar lose its fundamental support.At the same time, the strength of the euro has also put pressure on the US dollar. the epidemic in the United States has not yet improved and the economy will be hit again with the approach of the election, the further downward trend of the US dollar will remain unchanged, and the possibility of falling below 90 points is still high.

The US non-farm payrolls report will be released at 20:30 on Friday, with the market expecting 1.518 million new jobs in August, the unemployment rate is expected to fall from 10.2 per cent to 9.9 per cent in August, and the average hourly monthly wage rate is expected to fall from 0.2 per cent to 0 per cent.

The Federal Reserve released its economic "beige book", which showed an increase in economic activity in most regions.

On Wednesday, the Federal Reserve released its economic "beige book" (Beige Book) report. The report shows that economic activity has increased in most regions, but the overall increase is not large, and economic activity is still much lower than it was before the COVID-19 pandemic.

At the same time, the report highlights the uneven US economic recovery, with a strong recovery in some areas, such as a sharp rise in residential real estate prices with the help of low interest rates, but a limited rebound in others. And the economic rebound in different regions is uneven.

The Fed survey was conducted from July to late August. According to the "beige book", manufacturing increased in most regions, which is in line with the increase in activities of ports and transport and distribution companies. This is in line with the increase in activities of ports and transport and distribution companies, so manufacturing employment growth is more optimistic; but service sector employment growth has slowed and demand continues to be weak.

At the same time, consumer spending continues to pick up, driven by strong car sales and tourism and retail sales, but many regions point to a slowdown in growth and total spending is still well below pre-pandemic levels.

In the banking sector, overall loan demand increased slightly, driven by robust residential mortgage activity; agricultural activity continued to be affected by falling prices; and energy activity was at a low level. Few expect improvements in these two sectors in the short term.

In addition, commercial construction activity generally declined, while commercial real estate activity continued to contract. On the contrary, residential construction is a bright spot, showing growth and resilience in many areas. At the same time, residential real estate sales also increased significantly, and prices continued to rise with demand and inventory shortages.

At the same time, the report shows that economic progress is not evenly distributed across the country, with the New York Federal Reserve reporting stagnant economic activity, the Chicago Federal Reserve reporting strong growth, the Atlanta Federal Reserve seeing inconsistent signals, and the San Francisco Reserve reporting a slight expansion in economic activity. Overall, wages are flat or slightly higher in most areas, and the pressure on low-paid jobs is even greater.

Under the continuing influence of the epidemic, the recovery of the United States has entered a more bumpy stage. At the same time, the recovery also faces policy pressure, with less support for American households and businesses in August, and the expiration of the $600-a-week supplementary unemployment benefit plan and the wage protection plan. The United States is still deadlocked over a new stimulus package.

The report shows that the impact of uncertainty is significant, but companies in many regions see at least some signs of improvement. In the Chicago Fed area, for example, most companies expect growth in the future, but will not recover until at least the second half of 2021.

Us crude oil stocks fell for six consecutive weeks after the negative impact of the hurricane

Beijing, 22:30 on Wednesday, the newly released US EIA report showed that US commercial crude oil stocks excluding strategic reserves fell by 9.362 million barrels, or 1.8 per cent, to 498.4 million barrels in the week to August 28. This is the sixth consecutive week of decline in the value of U. S. crude oil inventories, the biggest drop since the week of July 24. At the same time, US gasoline inventories fell to their lowest level since December, with gasoline inventory changes falling for four consecutive weeks.

Specific data show that as of the week ending August 28, US EIA crude oil inventory changes were actually reported to be reduced by 9.362 million barrels, expected to decrease by 2 million barrels, and the previous value decreased by 4.689 million barrels; EIA gasoline stocks were actually reported to be reduced by 4.32 million barrels, expected to decrease by 3.05 million barrels, and the previous value decreased by 4.583 million barrels; and EIA refined oil stocks were actually reported to be reduced by 1.675 million barrels, expected to decrease by 1 million barrels, and the previous value increased by 1.388 million barrels.

On the production side, the EIA report showed that US domestic crude oil production fell by 1.1 million b / d to 9.7 million b / d last week; the four-week average supply of US crude oil products was 18.281 million b / d, down 15.9 per cent from the same period last year.

On the import and export side, the EIA report shows that US crude oil exports fell by 361000 b / d to 3.002 million b / d last week; commercial crude oil imports excluding the strategic reserve fell by 1.016 million b / d last week compared with the previous week; and US Gulf crude oil imports fell to 1.28 million b / d in the week to August 28, a record low.

Earlier, API crude oil stocks, which were announced in Beijing in the early hours of Wednesday, also recorded a higher-than-expected decline. According to data released by the American Petroleum Institute ((API)), US API crude oil stocks fell by 6.36 million barrels in the week ended August 28, with an expected decline of 2 million barrels; gasoline stocks decreased by 5.761 million barrels; and refined oil stocks decreased by 1.424 million barrels.

Us crude oil imports fell by 803000 b / d last week, while US crude oil stocks fell by 6.4 million b / d to 501.2 million b / d last week, according to the API report. In addition, the US drilling company reduced the number of oil rigs to 180, leaving the total number of wells unchanged at 254.

Market analysts believe that the latest EIA data reflect the impact of production shutdowns caused by Hurricane Laura, which forced refineries to close and stocks of gasoline and refined oil also fell. After the release of the EIA data, US Oil rose 0.30 US dollars per barrel for a short time, but then fell quickly.

Plastic futures prices continue to climb high, whether the capital push up can continue?

From a domestic point of view, plastic in the domestic futures market "led the way" on Wednesday. 2101 of plastic futures contracts rose sharply, rising to 7785 yuan / ton in intraday trading, a new high for the year, and then fell slightly to close at 7650 yuan / ton on the day, up 2.62 percent from the previous trading day.

It can be seen that the plastic market has fluctuated unilaterally recently, and the futures price has reached a new high in nearly a year. Guoxin Futures researcher he Wei believes that plastic prices continue to hit record highs driven by the following aspects.

First of all, the market has entered the traditional peak season of "Golden Nine and Silver Ten", the construction of agricultural film downstream has increased steadily, while the "double festival" of the Mid-Autumn Festival and National Day is approaching, and daily consumption such as food has increased to boost packaging demand. At the same time, the demand for protective equipment brought about by the epidemic is still increasing compared with the same period last year, and overall demand is expected to be better than the previous year.

Secondly, from the point of view of supply, the current domestic maintenance is decreasing and the output is increasing. Overseas, due to the hurricane closure of some factories in the United States, US exports are expected to decline in the next 1-2 months, and the supply of goods in the Middle East remains tight, and subsequent imports are expected to decline month-on-month, so market supply is expected to be generally stable. In terms of the new plant, Bora Petrochemical, Sinochem Refining and Sinochem Quanzhou have been put into trial operation, and the market is expected to achieve mass production in September, but in view of the stability of the new capacity production, the above-mentioned devices are likely to reach production in the fourth quarter.

Finally, the price of crude oil in the periphery moves up slowly, the overall chemical sector has a strong psychological and cost support, and the low inventory characteristics of plastics push prices to record highs again and again.

In the view of Zhang Jinsheng, a chemical researcher at Huatai Futures Research Institute, the recent upside mainly benefited from the positive stack of fundamentals. First, the recent petrochemical inventory is lower than expected, with 680000 tons of early oil storage as of Wednesday, which is much lower than the level of the same period last year under the background of the expected superimposed production of the epidemic, and the petrochemical inventory and the inventory of all links of the industrial chain are not high, which indicates that the inventory is digested beyond expectations rather than a simple transfer. Second, downstream agricultural film into the "gold nine silver ten" traditional consumption season, in the context of the absolute position of plastic prices is not high, the market bullish sentiment; third, LD due to Iranian cargo ships docking and other problems import share weak, tight supply makes its litter LL significantly expand, and then drive LL strong; fourth, the current spot market as a whole is relatively tight, upstream petrochemical adjustment and limited, further push up speculative bulls sentiment.

Overall, Guotai Junan futures researcher Zhang Chi said that due to the strong willingness of the bulls in the market to push up prices, the solidification of market stocks and the tight supply of goods in circulation, resulting in a strong upward trend in plastic futures prices in the near future. In terms of the market pattern, due to the pace of production of new capacity is not particularly fast, resulting in the expected capacity did not form an effective supply. At present, the upstream inventory is in a low position, about 685000 tons, which is in a neutral low position over the years, so it can be said that the supply is in a very tight state.

In addition, in terms of polyethylene, because many low-cost goods come from the United States, and the recent hurricane has affected production facilities in the United States, the output has been significantly reduced, so its price is stronger than polypropylene and has become the core of hype during this period of time. On the whole, he believes that the current price is overvalued, which may be relatively strong in recent days in the short term, but it should be adjusted later.

Judging from the current market fundamentals, he Wei said that in the short term, social inventories remain low, and there are expectations of the "Golden Nine Silver Ten" peak season downstream, while the reduction in imports at the supply side hedges the domestic production increase, and the market supply and demand maintain a tight balance; in the medium term, the demand side is expected to grow steadily, but the new production capacity is centrally released in the fourth quarter, the supply side is facing greater incremental pressure, and market supply and demand is expected to tend to be loose. Looking to the future, he believes that under the stimulation of delivery and emotional factors, plastic may continue to be strong in the short term, but it is necessary to focus on the downstream capacity to undertake high-priced raw materials, and the process of putting new capacity into production in the medium term will affect the pace of the market.

In the future, Zhang Jinsheng said that on the cost side, the crude oil is slowly removed from the warehouse, supporting a steady rise; on the supply side, there are not many new overhauls on the supply side, while the previous overhauls gradually resume production, and the supply chain increases. The concentrated and stable release of new production capacity will begin gradually after mid-September, and the current impact is limited; in terms of demand, the inventory of the industrial chain is gradually transferred to the peak season, and the inventory of the industrial chain is good. In terms of the outer disk, the future import volume should be at a medium-to-high level, but weaker than the middle and late second quarter, it is estimated that it will be difficult to exceed the 1.7 million-ton level. Overall, he said that in the context of the current low inventory, superimposed "gold, nine and silver ten" traditional consumption peak season, September balance sheet is expected to be in a state of destocking, plastic prices are still strong in the short and medium term. However, after October, the balance sheet will gradually level out or even accumulate, and plastic prices may still be under pressure.

The LPG futures price has fallen sharply, or it is due to the return of the difference between the current price and the futures price.

On Wednesday, there was an increase in positions in LPG futures, with the main contract PG2011 closing at 2583 yuan / ton, down 2.29% from the day before, basically erasing the increase of more than a week.

According to the team of Pan Xiang and Kang Yuanning of Huatai Futures Research Institute, the core driving factor behind this decline is the rational return of the current price. At present, the spot price of the benchmark for delivery in South China is about 2950 yuan / ton, while the futures market has performed relatively strongly relative to the spot market driven by funds, even though it experienced a sharp correction on August 20. as of Wednesday, the spot premium was still as high as 700 yuan / ton.

"from a fundamental point of view, it does not seem to be enough to support such a large forward spread." They said that on the one hand, from the perspective of the civilian market, China is currently at the end of the off-season of civil gas consumption, the contradiction between supply and demand is not obvious, and the recent spot prices in South China have generally remained in the range of 29003,000 yuan / ton. In the future, with the gradual decrease of temperature, the demand for civil combustion tends to pick up seasonally. On the other hand, from the perspective of the industrial demand market, in the environment of the global epidemic, the industrial combustion demand of export-oriented enterprises is difficult to reach the level of the same period in previous years. From the perspective of deep processing, more than 1 million tons / year of PDH and other downstream devices were put into production in the fourth quarter, which will support the domestic LPG demand. Overall, LPG consumers are more likely to improve in the future, which will push up spot prices to a certain extent.

However, from the point of view of the supply side, the inventory of import trading units is abundant in the early stage, and most of them will arrive later. In addition, the start-up and supply of domestic refineries have returned to their pre-epidemic levels, so the probability of a sharp tightening of the market in November is not high. At that time, it will be more difficult for spot prices to rise by another 700 yuan / ton at the current level.

They believe that in the context of the limited increase in spot prices, the return of cash also needs to play a role in the futures market, and the fall in futures prices on Wednesday also reflects the return of the base spread when the delivery period is gradually approaching. In addition, from the point of view of delivery, the higher basis (absolute value) gives the industry huge potential delivery profits, and the number of warehouse receipts is expected to increase significantly in the next two months. In addition, the delivery capacity is expected to be further expanded, and the expectation of forcing the warehouse is gradually weakening. it provides a more solid foundation for the return of the present.

In the future, they believe that although there is still room for further downside in the LPG futures market under the trend of basis regression, there are still two months to go from the main contract delivery period, and the existing registered warehouse orders are relatively small, so the long-short game is not completely over, and the short-term price still has the possibility of repeated oscillations in the short term, so we need to continue to pay attention to the changes of warehouse receipts and delivery capacity in the future.

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