According to finance news service (FNS) on July 17th, as factors such as the prospect of a rate cut by the Federal Reserve in the second half of the year heat up the market, the New York gold price has once again hit a new high of $2,487 per ounce on the 17th.

However, as the trading of gold heats up at home and abroad, the Shanghai Gold Exchange (hereinafter referred to as 'SHFE') issued an announcement on July 16th to lower the ratio of contract margins.

On the morning of July 17th, Ping An Bank followed suit and issued an announcement that the guarantee deposit ratio and limit of fluctuation range for the bank's gold spot deferred contract will be adjusted as follows according to the announcement "Adjustment on the Guarantee Deposit Level of Certain Contracts and the Limit-Up/Limit-Down Ratio" issued by the SHFE:

Specifically, from the closing clearing on Wednesday, July 17th 2024, the guarantee deposit ratio for individual customers Au(T+D), mAu(T+D), Au(T+N1), and Au(T+N2) contracts will be adjusted from 37% to 36%, and the guarantee deposit ratio for corporate customers of Au(T+D), mAu(T+D), Au(T+N1), and Au(T+N2) contracts will be adjusted from 21% to 20%. The range of rise and fall limitation will be adjusted to 8% starting from the next trading day.

On July 17th, Dongya Futures' chief economist Jing Chuan told FNS that although trading in the futures market for gold has been active recently, the trading activity of the Shanghai Gold Exchange has decreased, and the exchange reduced the guarantee deposit to strengthen trading liquidity.

On the same day, a person from a sales department of Citic Futures told an FNS reporter that they had observed a recent decrease in the trading volume of the SHFE, which is mainly spot trading-oriented, and this contrast to futures trading is not common.

Market consensus is bullish on gold futures, while there is a shortage of spot sales.

A senior research analyst from GF Futures told FNS on July 17th that the SHFE is an institution under the Central Bank, and the exchange mainly aims at bank and its customers for margin futures trading, while most professional institutional investors concentrate on the Shanghai Futures Exchange.

FNS has noticed that in the past year, whenever the international gold price reaches a new high and market trading is active, the Shanghai Futures Exchange and Shanghai Gold Exchange generally increase the margin to cool it down.

The latest time was on May 21st, when the Shanghai Silver index rose by more than 10%, hitting a new high in nearly a decade.

After the closing settlement on May 23rd, 2024, the trading margin ratios and limit-up/limit-down ratios of gold and silver futures contracts will be adjusted to 10%, the margin ratio for hedging transaction will be increased to 11%, and the margin ratio for speculative transaction will be increased to 12%. This announcement was issued by the SHFE right after the May 21st surge.

Before and after April 15th, the two exchanges also raised their margin ratios successively, and after the SHFE announcement, the Shanghai gold once again hit a new historical high of 590.65 yuan/gram.

On the day before, the Shanghai Gold Exchange announced that the guarantee deposit ratio of Au(T+D), mAu(T+D), Au(T+N1), Au(T+N2), NYAuTN06, NYAuTN12 contracts would be adjusted from 9% to 10% starting from May 21st, 2024 (closing clearing time) and the limit-up/limit-down ratios will be adjusted from 8% to 9% starting from the next trading day.

Many participants in the futures industry told FNS on July 17th that the SHFE and Shanghai Futures Exchange were not synchronized this time, and even the SHFE lowered the ratio of contract margins against the market, which should be related to the decline in the turnover rate and the recent conservative trading sentiment. In addition, market consensus is bullish on future gold prices, and futures are bought on the dip while there is a shortage of spot sales.

With the expectation of a rate cut and geopolitical uncertainty, the gold price continues to rise.

On July 17th, Dongwu Futures reported that CME's FedWatch tool shows a 93.3% chance of the Federal Reserve lowering the federal funds rate target range by 0.25 percentage points in September. Some traders also believe that the Fed will cut interest rates at the end of July and again in September, leading to a historic high in spot gold and a strong performance in precious metal futures.

Citibank's report suggests that the trend of gold consumption growth will improve in 2024, which may push spot trading to a record of $2,400-$2,600 per ounce in the second half of 2024. The target price for gold by mid-2025 under this baseline is $2,800-$3,000 per ounce.

On July 16th, the Chicago Mercantile Exchange issued a statement stating that the assassination attempt on Trump has become a sudden variable that the global market is paying attention to this week and may boost safe haven sentiment, leading to short-term increases in safe-haven assets such as the US dollar and gold. In the next step, traders should continue to pay attention to central bank policy trends and geopolitical factors.

The latest report from Dayou Futures on the evening of July 17th stated that precious metals have begun trading on the Trump market, and Federal Reserve Chairman Powell has also stated that there is no need to wait until inflation drops to 2% before cutting interest rates. Traders are betting that the Fed's probability of cutting interest rates in September is close to 100%. The closing price of gold in London set a new historical high, and the upward trend may further open up.

However, it should be noted that the Eurozone's economic outlook is declining, the euro is weak, and the US dollar index may fluctuate in the short term; Trump's low tax policy means more debt issuance, and the downward trend of US Treasury yields may not be smooth. This will bring significant volatility to the price of precious metals in the process of rising.