SMM: on the evening of October 13th, both COMEX gold and silver futures fell, with the settlement price of the main December contract in New York gold at $1894.6, down 1.8%; and the December contract in New York silver at $25.271, down 4.5%. Domestic gold and silver futures led the decline when trading opened in the morning on October 14. by the close of trading at noon, the main contract of Shanghai Gold 2012 was at 403.06 yuan / g, down 1.63%, while the main contract of Shanghai Silver 2012 was at 5126 yuan / kg, down 3.92%. Recent changes in US bond interest rates and inflation expectations have converged, with 10-year real interest rates fluctuating around-0.95%. Gold and silver are still dominated by wide swings in the short term.
The decline in precious metals is due to increased volatility under multiple uncertainties and a pullback in a wide shock pattern, mainly due to the hope of a rebound in inflation in the United States and the suppression of optimistic expectations of fiscal stimulation. and the blocking of progress in vaccine research and development is caused by the concentrated influence of three negative factors. Last night, the US announced that core CPI growth in September was 1.7 per cent the same as the previous month, but the pace of repair slowed further from a month-on-month growth of just 0.2 per cent, dampening optimistic expectations about the outlook for US inflation. In the early days, the market was more optimistic about the launch of a new round of fiscal stimulus in the United States, but there was still a dispute between the two parties on the specific form and details of the fiscal stimulus. Republican Senate Majority Leader Mitch McConnell and Trump disagreed on the amount of fiscal stimulus, and the fiscal stimulus was deadlocked. In addition, poor progress in novel coronavirus vaccine research and development has dealt a blow to market sentiment, weakening the price of precious metals.
With the advance of the US election, factors such as fiscal stimulus, election situation and overseas epidemic vaccines are still facing high uncertainties, and we need to continue to pay attention to the impact of three factors on precious metal prices in the future:
1. Progress of fiscal stimulus: the progress of fiscal stimulus is volatile and fast, and early market optimism about the introduction of fiscal stimulus has been boosted, but this week's fiscal stimulus bill has intensified both within the Republican Party and between the two parties, reaching a stalemate again to suppress gold and silver. With the real economy still weak and in need of policy support, a new round of fiscal stimulus will eventually be launched, and there is a high probability that optimistic progress and eventual landing after the election will boost market confidence in favor of precious metals.
2. Uncertainty in the general election game: since the National Day, Biden's lead in the polls has expanded, the election situation has gradually become clear, and optimism has triggered a rise in the prices of various assets, including gold and silver. However, uncertainty is still high before the election, and there is a risk that the announcement of the election results will be delayed by the epidemic and artificial obstruction by politicians, and the anxious election situation is expected to exacerbate market volatility and trigger a safe-haven dollar rebound. become a resistance to the short-term strength of precious metals prices.
3. Repair of the real economy: there has been a second rebound in the epidemic in Europe and the United States recently, and the US manufacturing PMI, non-farm payrolls data and CPI data all show signs of slowing down. The GDP and PCE price indices for the third quarter of the United States, as well as the research and development of novel coronavirus vaccine, which will be released in late October, are worthy of attention. If there is a moderate improvement in the pace of repair in the real economy, good progress in vaccines will support the rebound in inflation expectations and be good for gold and silver.
Looking to the future, if the election situation is anxious, the fiscal stimulus stalemate continues, and the US real economy recovers frustrated under the rebound of the epidemic in Europe and the United States, it will deal a blow to market confidence in inflation, and precious metals will still have a pullback pressure. However, due to the small room for the recovery of nominal interest rates on US Treasuries, the inflation target has been relaxed to facilitate the rebound in medium-and long-term inflation expectations, and the correction in precious metals is limited. The volatility in the general election environment has intensified, and it will still be dominated by wide shocks in the short term.
