Expectations of interest rate cuts rise and events boost risk aversion
The price of precious metals has risen sharply
Precious metals prices have risen sharply recently due to rising expectations of interest rate cuts and risk aversion, as well as concerns about COMEX copper delivery in overseas markets, driven by bullish sentiment in the non-ferrous sector as a whole. Shanghai Bank rose by the daily limit at the beginning of the day on the 20th, and rose more than 7% in the night trading, reaching a high of 8733 yuan / kg at one point, giving up some of the increase to around 8200 yuan / kg on the 21st, or taking profits at a high level due to some long funds. Shanghai gold fell to about 572 in intraday trading on the 21st.Playtoearnnftgame.7 yuan / g, which still has an increase of nearly 3% in the last four trading days. COMEX silver fell from a high of $32.75 / oz to about $31.60 / oz, while COMEX gold fell to about $2420 / oz. CME gold volatility fell 2 per cent to 16.83. CME silver volatility fell slightly, still at a high of 44.7.
Fundamentally, recent data show that the US economic climate data has declined, employment has weakened, and inflationary pressures have eased to some extent. The US ISM manufacturing index fell to 49.2 in April, while the US ISM non-manufacturing PMI fell to 49.4 in April. Us non-farm payrolls rose by 175000 in April, down 140000 from the previous month and lower than previously expected. Us CPI in April was in line with expectations, and core CPI fell to 3.6 per cent, the lowest since 2021. Us retail sales were unexpectedly flat in April from a month earlier, reflecting a possible weakening of consumer support for the US economy. Affected by the data, the expectations of interest rate cuts in overseas markets are heating up again, and the current market expects the Federal Reserve to cut interest rates for the first time in September, possibly twice this year by a total of 50bp.
According to the Iranian Embassy in Beijing, Iranian President Leahy and Iranian Foreign Minister Abdullahiyan were killed in the accident. On the 20th, the ferment of the incident heightened risk aversion in overseas markets, and precious metal prices rose sharply driven by bullish sentiment. In the follow-up, we still need to pay attention to the development of the situation in the Middle East, with strong uncertainty.
In terms of funds, as of the week ended May 14, COMEX gold futures management fund net excess positions increased by 4336 hands to 130435 hands, COMEX silver futures management fund net excess positions increased by 5502 hands to 39696 hands, short-term speculative funds are also relatively optimistic about the performance of precious metals.
The continued purchase of gold by global central banks may also form a certain support for the price of gold. Gold not only plays its implied monetary attribute in the process of "de-dollarization", but also has super-matching value because of its risk aversion and anti-inflation attribute. According to the World Gold Council, mine-generated gold production rose 4% year-on-year to 893 tons in the first quarter, while gold recovery rose 12% to 351 tons, driven by the previous rise in gold prices. In the first quarter of this year, central banks around the world increased their gold reserves by 290 tons.PlaytoearnnftgameChina's central bank bought a total of 27 tons of gold in the first quarter, contributing the largest increase. By the end of April 2024, China's central bank's gold reserves reported 72.8 million ounces, up 60, 000 ounces from the previous month, and has increased its gold holdings for 18 consecutive months. The price of precious metals fluctuates or intensifies in the short term due to the disturbance of geopolitical conflicts on market risk aversion. From a medium-and long-term point of view, the follow-up market may adjust interest rate cut expectations mainly based on the US economy and inflation performance, as the Fed's interest rate cut this year is still a high probability event, and in the environment of downward interest rates, the allocation value of precious metals as zero-interest assets increases, it is recommended that precious metals maintain more thinking in the medium to long term.
* the above content is selected from "Precious Metals maintenance thinking" published in Futures Daily on May 22, 2024.
Unit: Guangzhou Futures, author: Tang Shubin
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