SMM News: Tuesday, the United States fiscal stimulus negotiations are expected to improve, becoming the most important factor to support gold prices in the short term. Recently, the dollar index oscillation weakened below the 93 mark, spot gold maintained the upward state of oscillation since late September, the current oscillation around 1920 US dollars / ounce. Recently, the overall volatility of gold price is relatively limited, with a volatility of only about $20. Since the bottom rebound at the end of September, the volatility of the market has gradually weakened, which makes it difficult for the trend market to appear, and the oscillation has become the main tone. In the short term, bulls are likely to hit $1930 an ounce, but the momentum for further gains has yet to be tapped. The lower $1870 / oz is the key support, and there is a risk of going lower after the break.
From the perspective of events, at present, the market is most concerned about two American factors, which are also potential, an important factor that can break the low volatility of gold prices, one is the landing of US fiscal stimulus, and the other is the US election.
The main logic of gold's correction since mid-August is that US stimulus policies have been slow to land. So far, the two parties in the United States are becoming more and more inclined to reach an agreement. House Speaker Nancy Pelosi on Tuesday set a deadline for negotiating a stimulus package before the election, saying she was optimistic about a possible COVID-19 aid deal. Meanwhile, despite opposition to a massive stimulus package by Republicans in the Senate, US President Donald Trump is still pushing for a comprehensive bailout plan, saying he will accept a deal of more than $2.2 trillion. There is a high probability that the US fiscal stimulus will fall, and the current obstacle lies in the scale of the policy. No matter when it hits the ground, there will be support for the gold price, but the landing time affects the fluctuation rhythm of the gold price. Personally, I think that the Democratic Party will not choose to compromise before the election, and the passage of the bill before the election can only be a compromise on the Republican side. After all, passing the bill is an additional item for Trump.
The result of the US general election will be on the ground on November 3, considering that the gold price has been oscillating for a long time, so the result of this election may be the key for the gold price to break the oscillation pattern. Volatility in the gold market is bound to increase, so we recommend strategically long volatility and buy deeply imaginary call and put options, that is, a wide-span combination. The above strategy is a defensive strategy, once there is a small probability of tail risk, then the effect of the strategy will be better. On the other hand, the market trend before the 2016 election is very similar to that of this year, all going down before the election and continuing to decline after the 2016 election, but this year we think the logic is completely different. No matter which president is elected, chances are that we will continue to increase the stimulus. After the election, we think that the price of gold is still difficult to fall.
In the medium term, the main logic of the gold market mainly revolves around the progress of the epidemic and the difference between the global economic recovery and market expectations. In terms of the epidemic, whether the world can usher in another outbreak in winter, and whether there is progress in vaccine promotion, still affect the confidence of the market. As of 12:00 on October 21 in Beijing, the cumulative number of confirmed cases of COVID-19 in the world exceeded 41.04 million, while the number of confirmed cases confirmed by COVID-19 in the United States increased by at least 60499 on Tuesday, with a total of 8.31 million confirmed cases. The progress of the epidemic in Europe is more worrying to the market than in the United States. European leaders have stepped up measures to slow the spread of the crisis: restarting blockades in some areas after sporadic restrictions have had little effect. Judging from the progress of the vaccine, we are not pessimistic about the long-term control of the epidemic in Europe and the United States, but the spread of the epidemic in the medium term is still hardly completely controllable. From the performance of economic data, except for China, the epidemic is still a perplexing factor for the economic recovery of other economies, and the global economy is likely to maintain the status quo or not expected in the fourth quarter. Therefore, as long as there is no significant improvement in the epidemic or vaccine, we believe that gold prices are generally bullish in the fourth quarter.
