The U.S. economy is suspicious, and the Fed’s interest rate hike is high. The European Central Bank took the initiative to release water. However, the author believes that the Fed entered the wait-and-see period to support the rebound in gold prices, and the European Central Bank took the initiative to loosen it and did not help gold. From a seasonal perspective, it is difficult to have a large unilateral market in the second quarter, but the central bank’s aggressive “bargain-hunting” is quite bright. It is expected that the overall gold price will continue to move upwards.
The Federal Reserve entered the wait-and-see period
US non-farm payrolls data in February fell sharply less than expected, and inflation data continued to perform poorly this week. As a result, the Fed’s expectations of not moving are strengthened and support for gold prices. Although the labor market is tightening to push up wage growth, the US and global economic slowdown has inhibited inflation. The Fed has already fed the federalinterest rateThe statement of further upward revision was changed to “In view of the development of the global economic and financial situation and the weakening of inflationary pressures, it is decided how to adjust the federal government in the future.fundaimsinterest rateAt the time, the committee will remain patient. The poor performance of inflation makes the Fed seem more justified to keep interest rates unchanged for a long time. This clearly constitutes a bullish support for gold.
However, it should also be noted that the bullish effect of the Fed's dovish on gold may also be marginally diminished by the market's gradual digestion. At present, the market predicts that the probability of the Fed keeping interest rates unchanged this year is as high as 78%, and even a 20% probability of interest rate cuts. From the current economic data, the probability of a worse situation than the market expectation is relatively low.
European Central Bank is difficult to get gold prices
The European Central Bank did not move as scheduled at the latest policy meeting, and changed the interest rate forward guidance to “will keep interest rates unchanged until at least the end of 2019”, compared with “the interest rate will remain unchanged at least until the summer of 2019”. The statement has been postponed. Beginning in September 2019, the European Central Bank will also launch a new series of quarterly long-term refinancing operations, ending in March 2021. It seems that the European Central Bank has restarted a series of operations.currency"Opening the floodgates," but the author believes that the European Central Bank's easing policy is difficult to become a driving force for the rise in gold prices.
First, the euro zone policy is still a slow contraction. The European Central Bank has ended its 2.6 trillion euro bond purchase program. In comparison, the main purpose of the new TLTRO is to stabilize inflation, not to combat deflation. Second, the new round of TLTRO is limited in scale. In 2020, the European Central Bank will have a large number of TLTRO loans due, and the introduction of a new round of TLTRO is mainly used to ease the financing difficulties of the debtor countries. Last but not least, it is not easy for the Eurozone to “water” to water to gold. Its main logical chain is the depreciation of the local currency that triggered the euro, which led to the shift to the allocation of gold assets, but the problem is that the competitive dollar assets are also attractive. Therefore, this can also explain why the European Central Bank's balance sheet expanded significantly by 2.3 times between 2015 and 2019, but the price of gold continued to be low.
Seasonal oscillation period
Judging from the seasonality of gold, the large unilateral market in the past few years did not occur in the second quarter. In general, the peak season at the beginning of the gold price reached a stage high in March. In the subsequent 3-6 months, there have been three years of wide-angle oscillations in the past five years, and two years of performance as weak oscillations.
According to the latest data released by the People's Bank of China, as of the end of February 2019, China's gold reserves were 60.26 million ounces, an increase of 320,000 ounces. This is the third consecutive month that the central bank bought gold. In the current round of the gold purchase cycle, the central bank's total purchase volume reached 1.02 million ounces. In view of the good performance of the central bank's “bargain-hunting” in the previous gold holding period, the probability of a stronger gold price trend in the future is greater.
In summary, the author believes that the Fed has a support for the gold price during the wait-and-see period, but it is not appropriate to expect too much from the ECB's “discharge”. Under the signal that the central bank is actively bargaining, it is expected that gold will show a strong oscillation and the trend of shifting its center of gravity. (Author: Baocheng Futures)
(Article source: Futures Daily)