Original title: gold Trading reminder: employment fatigue or keeping the Fed loose until 2025? There is nothing to fear about the correction of gold, and the US bond options market implies a big profit.
Spot gold rebounded slightly on Friday to $1951.58, or 0.36%. Gold fell to a more than one-week low on Thursday after the Fed dashed investors' hopes of more stimulus measures to support the economy hit by the epidemic.
At the same time, recent ETF positions in gold remain weak and have been flat since mid-August, suggesting a lack of speculative demand for gold in the absence of more impetus, which will also limit gold's gains.
However, some analysts predict that even without more stimulus, the Fed is likely to keep interest rates low until 2025, as the job market recovery is weak and the Fed will remain loose until the goal of full employment is achieved.
At the same time, the continued spread of the epidemic will continue to deal a blow to the prospects of economic recovery, with data showing that the cumulative number of confirmed cases worldwide has exceeded 30 million.
In addition, the US election is approaching, and the US bond options market suggests that the market regards the US election as the biggest risk event in a decade, which will also trigger demand for gold.
Overall, gold is expected to gain support again as markets digest the impact of the Fed's lack of stimulus and focus on the prospects for US and global economic recovery, inflation expectations and real interest rates.
For a short time, gold continues to be within the range of convergence and is expected to choose the direction. Pay attention to the initial consumer confidence index of the University of Michigan in September.
Fed hinted not to expand stimulus + US economic data improved to put pressure on gold
Gold fell to a more than one-week low on Thursday after the Fed dashed investors' hopes of more stimulus measures to support the economy hit by the epidemic.
Bart Melek, head of commodities strategy at TD Securities, said: "although the Fed is quite dovish, it does not seem dovish enough for the gold market. There are fears that without more quantitative easing, gold's momentum could weaken. "
The Fed has promised to keep interest rates near zero until inflation moderately exceeds its 2 per cent target "for some time". So far this year, due to global interest rates near zero and the need to hedge against inflation, the price of goldIt's up 28%.
The Fed also said it expected the economy to recover faster than previously expected and the unemployment rate to fall faster than expected in June.
Data on initial jobless claims released on Thursday also partially weighed on gold prices. First-time jobless claims resumed the downward trend last week, and continued jobless claims fell by nearly 1 million in the week of Sept. 5, indicating a gradual improvement in the job market. The index of consumer economic expectations rose to a six-month high in September. New housing starts fell more than expected in August.
The improvement in US economic data is likely to reinforce expectations that the Fed will not issue more stimulus, which also puts some pressure on gold prices.
Gold short-term may test the $1900 mark, the long-term trend remains unchanged
Ole Hansen, head of commodities strategy at Saxo Bank, said the Fed hinted that it did not intend to raise interest rates over the next two years, but the lack of any new stimulus measures could push gold prices to the bottom of the current range of about $1900.
Mr Hansen said that despite the Fed's commitment to keep interest rates at a minimum for more than three years, overall market reactions such as falling stock markets and a stronger dollar had raised concerns that the Fed's toolbox had begun to become empty. there are no more surprises. "
The S & P 500 posted its biggest decline in a week on Thursday, led by technology stocks, as investors weighed whether the existing stimulus was strong enough to drive a sustained economic recovery.
The S & P 500 fell 0.8% to 3357.01.
The Dow Jones industrial average fell 0.5% to 27901.98, while the NASDAQ fell 1.3% to 10910.28.
Generally speaking, the US stock market and safe haven gold tend to be inversely related, but the current record US stock market has been out of touch with fundamentals and is more driven by capital, and loose expectations are also a key factor supporting gold prices. Gold came under pressure as the Fed hinted that it would not introduce further stimulus measures, which pushed the stock market back.
Hansen pointed out that the gold market is struggling as the Fed's latest outlook stabilizes 10-year bond yields and real interest rates rise as inflation expectations fall. A stronger dollar could add to the pressure on gold.
While gold prices look fragile in the near term, Hansen said he expected the market to maintain a long-term upward trend.
He added that there was significant uncertainty in the market and would continue to maintain interest in gold. In particular, the trend that the spread of the epidemic has not yet slowed will continue to hinder economic recovery, he added.
"We are concerned that those views on when the vaccine will be put into use may be too optimistic," he said. As the number of cases around the world continues to rise, the global economic recovery looks set to slow in the coming months. "
ETF positions in gold suggest that speculative demand remains weak
Gold ETFs data showed that the world's largest gold ETF-SPDR Gold Trust held 1246.99 tons of gold as of Sept. 17, down 0.58 tons from the previous trading day.
Gold ETF positions have been leveling off since mid-August, suggesting a lack of speculative buying in gold.
Historically, gold demand consists of 30 per cent of investment demand and 70 per cent of physical demand. But since the outbreak, investment demand for gold has risen to 70% of total demand, which is a key reason why the sharp increase in gold ETF positions has pushed gold to a record high.
If gold ETF positions continue to maintain the current situation, gold is expected to continue to maintain range shocks.
Full employment makes it possible for the Fed to maintain current interest rates until 2025.
But although the Fed has hinted that it will not expand its easing measures further, it will put pressure on gold. But some analysts point out that since the Fed adjusted its inflation target, the job market has gradually become the focus of work, and the Fed is likely to stay near current interest rates for longer until there is a full recovery in the job market.
In response, Bank of Singapore expects the Fed to keep interest rates near zero by 2025, and the yield on 10-year Treasuries is expected to be 0.9% in the coming year.
Mansoor Mohi-uddin, chief economist of Bank of Singapore, said: "the Fed's latest meeting did not change its monetary policy position, keeping the target range of the federal funds rate at 0.00-0.25% and maintaining the current pace of bond purchases, but the latest forecast interest rates will remain unchanged until at least 2023."
He expects the federal funds rate to remain near zero by 2025 because the fed may be more willing to wait for inflation to exceed 2 per cent and maintain full employment in the labour market in 2024 and then raise interest rates in 2025.
In fact, Federal Reserve Chairman Powell also conveyed concerns about the recovery of the job market in this resolution.
Mr Powell pointed out that maximum employment could not be attributed to a single number like inflation, after the Fed announced its commitment to keep interest rates low. until they believe that the job market is strong and inflation is on track above the Fed's 2 per cent target for some time.
Asked if the Fed would like to see the unemployment rate return to the level seen earlier this year, Powell said the Fed's goal is not a specific figure.
But he points out that "the 3.5% unemployment rate is very agreeable."
Powell came up with a list of observation factors, including wage growth and labor participation rates, which must be met before the Fed considers the economy at maximum employment and considers raising interest rates.
At the same time, although the number of initial jobless claims fell on Thursday, the decline was smaller than expected, and the number of initial jobless claims in the previous week was revised up, suggesting that the job market recovery has shifted to a low speed with the weakening of fiscal stimulus measures.
The Bank of Singapore believes that the Fed will keep interest rates on US Treasuries very low and that the Fed is likely to keep interest rates near zero until 2025. In the long run, this also supports gold prices.
The epidemic continues to spread and the global economic recovery still faces challenges.
The number of confirmed cases around the world continued to climb rapidly, reaching 30 million by 18 September, rising from 20 million to 30 million in just 38 days.
Real-time statistics released by Johns Hopkins University in the United States show that as of 06:41 Beijing time on September 18, 2020, COVID-19 has cumulatively diagnosed more than 30 million cases, reaching 30003378 cases, 943203 deaths, and a cumulative number of confirmed countries and regions. The most severe epidemic in the Americas has accumulated more than 15.09 million confirmed cases, of which COVID-19 in the United States has more than 6.66 million confirmed cases and 197000 deaths.
Moderna Inc released the COVID-19 vaccine trial analysis plan, saying that it is impossible for everyone in the United States to be vaccinated in the first quarter of next year. The number of new cases in France in a single day is the highest since the end of the blockade, and the health minister has warned that the epidemic has intensified again.
The cumulative number of confirmed cases of COVID-19 in India exceeded 5 million, reaching 5020359, with a total of 82066 deaths, according to data released by the Indian Ministry of Health on the 16th.
Analysts pointed out that the government lifted the blockade measures prematurely and the people did not strictly abide by the epidemic prevention regulations, which are important reasons for the sustained and rapid growth of the epidemic in India, but if the epidemic prevention measures are strengthened at this time, it is bound to make the economy worse. Faced with such a grim situation, the Indian government is in a dilemma.
It could take up to five years for the global economy to recover from the COVID-19 epidemic crisis, World Bank and chief economist Reinhart said on Thursday.
"there may be a rapid rebound as all restrictions on epidemic blockades are lifted, but it will take up to five years to fully recover," Reinhart said at a conference in Madrid. "the recession triggered by the COVID-19 epidemic will last longer in some countries than in others, and will exacerbate the gap between rich and poor because the epidemic hits the poorest countries more than rich ones."
She said the global poverty rate would rise after the crisis for the first time in 20 years.
The market sees the US election as the biggest risk event in a decade, which could boost some gold buying and demand
The US bond options market sees the US election as one of the biggest risks of isolated events in at least a decade.
The ICE BofA MOVE index, which measures the expected volatility of the bond yield curve, shows that the spread between the one-month and three-month indices has reached its current high only once in the past decade.
Investors' vigilance against large volatility in the short term can be seen in cross-asset volatility, especially the spread between the foreign exchange market and the US bond market. Outside the US, the US election has also begun to make emerging market investors nervous, with implied volatility rising, with strategists and investors urging caution.
The interest rate swap options market also shows that traders are preparing for big swings.
Investors' forecasts are based on the following reasons:
Few in the ① predicted Trump's election in 2016, when 30-year Treasuries fluctuated at their highest level since records began in February 1977. This is a resurgence of similar concerns.
② faces greater uncertainty about this year's voting results due to travel restrictions caused by the epidemic and potential legal challenges in counting votes in 2020, prompting people to be more wary of this year's general election.
The adjustment of ③ institutions has also played a role in adding fuel to the flames. The dealer's risk management department will limit the short exposure allowed during the election.
Overall, investors may also buy safe-haven gold to hedge against market risk in order to guard against market volatility before the US election.
Imperial Commercial Bank of Canada: gold is still at the beginning of a bull market
Canada's Imperial Commercial Bank (CIBC) said gold and silver this summerThe impressive rebound is just the beginning of a bull market.
In a report released on Tuesday, commodity analysts at CIBC extended their price forecasts for gold and silver to 2021.
Analysts said they expected gold to average around $1925 an ounce in the third quarter. Analysts say the average price will rise to $2000 in the fourth quarter.
CIBC expects gold to average $2300 an ounce in 2021, $2200 an ounce in 2022, $2100 an ounce in 2023 and $2000 an ounce in 2024.
The investment bank said the prospect of continued low real interest rates, an increased government debt burden and geopolitical uncertainty over the upcoming US election supported a further sharp rise in prices.
Analysts said gold investors should continue to focus on real interest rates as a key factor driving gold prices higher in the long run. They also said central banks were expected to inject more liquidity to support financial markets.
Analysts said: "We seem to be in the midst of a new round of quantitative easing and there is significant uncertainty about the size and duration of the global recession and real interest rates will remain below 2 per cent in the short term. Gold and silver prices have responded favourably to fundamentals, and if history repeats itself, there may still be room to rise. "
CIBC also believes that further weakness in the dollar is another important factor supporting gold and silver prices.
The dollar is still under pressure because the epidemic is far from being brought under control and some pandemic stimulus measures will be launched in the coming months. Due to America's heavy debt burden, high unemployment and uncertainty in international relations
The dominance of the dollar may end for some time. "
Prospect of the future market
① 14:00 monthly rate of retail sales in the UK after quarterly adjustment in August
② 20:30 monthly rate of Canadian Retail sales in July
③ 20:30 US second quarter current account
④ 22:00 preliminary value of the University of Michigan Consumer confidence Index in September
Total number of oil rigs in the week from 01:00 to 18 September in ⑤
