Economic Observer Network reporter Chen ShanCommodity markets have been on a rapid downward trend recently, and precious metals have also suffered a massive sell-off.
Since July, international gold has broken through the 1800 and 1750 US dollars one after another and challenged 1700 US dollars per ounce.
The reporter learned from the teller of a Chow Tai Fook store in Shanghai that the fall in the price of gold has also attracted the attention of the public. On July 13, the gold investment product marked by the store was 440 yuan per gram, down 17 yuan per gram from the beginning of the month and more than 30 yuan per gram from the beginning of March. “The price of gold has indeed fallen a lot recently, and the number of people who come to consult has increased significantly.
The reporter learned from a number of interviewees that the continued strength of the US dollar and the expectation that the Federal Reserve will continue to aggressively raise interest rates have formed a clear and continuous pressure on precious metal prices. But from the current point of view, the industry’s views on the later trend of gold are divided.
Precious metals suffer massive sell-off
On July 13, the U.S. dollar index stood at the 108 integer mark, a new high since 2002, while the international gold price fell to $1,706 per ounce, the lowest price since September 2021.
Since the beginning of this year, the price of gold has gone out of the “inverted V” market. In the first quarter of 2022, with the brewing and outbreak of the Russian-Ukrainian conflict, the COMEX gold price once hit a high of $2,080 for the year. The main logic of the market lies in concerns about inflation and risk aversion.But with the Fed officially starting rate hikes in March, May and June
Further increasing the rate of interest rate hike, the dollar index entered a new round of gains, and soon broke through the 100 integer mark. The strengthening of the U.S. dollar has been accompanied by a continuous rise in U.S. bond yields, which has continued to weigh on gold prices. During this period, the COMEX gold price oscillated and weakened, with a cumulative decline of more than 16% so far.
In the process of falling gold prices, the market’s bullish capital strength is gradually weakening. According to data from the U.S. Commodity Futures Trading Commission (CFTC), as of the week of July 5, the COMEX gold non-commercial net position has dropped to 145,660 contracts, hitting a new low in recent years. In addition, from the perspective of gold ETF holdings, as of July 12, SPDR gold ETF holdings fell 85.21 tons from the year’s high to 1,021.53 tons, the lowest level since March.
Not only gold, but precious metals such as silver, platinum, and palladium have recently fallen to a greater extent. COMEX silver fell to US$18.6/oz a few days ago, down more than 30% from the high of US$27.5/oz in early March; platinum for October delivery also fell by 31% from the previous high; palladium for September delivery fell to 1765 in mid-June USD/oz has fallen by as much as 48% from the year’s high.
Do more opportunities come?
The reporter noticed that the fall in the price of gold also created some demand for gold purchases: “I’ll buy a little while the price of gold is cheap.” Up” logic began to appear. At this point, is there an opportunity for gold to go long?
On the evening of July 13, the CPI for June announced by the United States reached 9.1% year-on-year, far exceeding market expectations by 8.8% and hitting a new high for more than 40 years. The price of gold went down rapidly; but the inflation exceeding expectations is actually bullish for gold, so a game between long and short is formed.
Compared with the high level in early March, the international gold price has dropped by nearly 20% in recent months, and the market has divergent views on the later trend of gold.
Looking forward to the future trend of gold prices, Zhan Dapeng, research director of Everbright Futures Nonferrous Metals, analyzed to reporters that the interest rate hike in July may continue to show a “bad landing” trend, and the pace of later interest rate hikes is also expected to slow down, which is not a bad thing for gold. Therefore, gold may have a rebound probability after the Fed’s July interest rate meeting; however, from a medium-term perspective, the peaking and falling inflation itself will not be a significant bullish boost for gold. With the expectation of economic recession under aggressive interest rate hikes, the overall Looking at the price of gold is still the trend of rebounding and selling short.
Valeria Bednarik, chief analyst at FXStreet, recently wrote an analysis of the technical outlook for gold prices. Bednarik noted that the dollar remains strong amid recession fears and U.S. inflation data coming out. Gold still has room to test the 2021 low of $1676.73 an ounce.
However, some institutions are optimistic about the future performance of gold.
Goldman Sachs commodity analyst Mikhail Sprogis is bullish on gold again after raising his target price for gold to $2,500 an ounce. In its latest report, the slowdown in inflation can shift the market focus from persistent tightening to recession risks, a shift that will reduce the downward pressure on gold prices from continued gains in the U.S. dollar and interest rates. If there is a “defensive switch” of funds from stocks to bonds, gold will “glow again”.
Wang Xiang, manager of the Gold ETF of Bosera Fund, analyzed to reporters that in the context of intensified commodity turmoil, recession haze lingering in the market, and the Federal Reserve insisting on rapid interest rate hikes, gold investors including global gold ETFs and major futures markets have appeared significantly Withdrawal, the net long position of the COMEX gold futures fund has dropped below the historical 10% quantile. Historically, when the net long position of gold futures is below this quantile, the gold market can reap an average increase of 6.67% in the next six months, and the winning rate reaches 76%. If it is the dimension of the next year,
Then the average return can be greatly increased to 18.2%, and the winning rate can reach an astonishing 88%. The reason behind this is mainly due to the reversal of extreme pessimism in the market.
Wang Xiang said, “It is expected that the gold market will continue to hover at a low level in the short term. After the pessimism is fully fermented and the damage of interest rate hikes to the economy as a whole becomes more explicit, with the reversal and even inversion of the performance of the long- and short-term interest rate differentials, gold will continue to rise. Only assets can really take advantage of the trend and fly against the wind.”Return to Sohu, see more
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