Gold T+D closed down, and the market pays close attention to the US May inflation data to be announced later
On Thursday (June 10), the Shanghai Gold Exchange gold T+D closed down 0.25% to 384.89 yuan/g; silver T+D closed down 0.21% to 5581 yuan/kg. Gold prices closed down mainly due to the strengthening of the U.S. dollar and rising market concerns about the Fed’s discussion of reducing bond purchases next week. However, the decline in gold prices is limited because the market is closely waiting for the upcoming US inflation data for May to find the US inflation level. And a clearer signal of economic growth.
On June 10, 2021, the Shanghai Gold Exchange’s trading market, the trading volume of gold T+D was 24.198 tons;
Gold T+D closed down by 0.25% to 384.89 yuan/g, with a trading volume of 24.198 tons and a turnover of 9,3144.99660 yuan. The settlement direction was “pay over to short”, with a settlement volume of 13.296 tons;
Mini gold T+D closed down 0.31% to 384.62 yuan/g, with a trading volume of 3.6732 tons, with a turnover of 1,413,860,1742 yuan. The settlement direction was “pay over to short”, with a settlement volume of 25.042 tons;
Silver T+D closed down by 0.21% to 5581 yuan/kg. The transaction volume was 4,122.302 tons, and the transaction value was 23.1 billion 104400 yuan. The settlement direction was “pay short to long”, and the settlement volume was 0.000 tons.
The Fed’s concerns about QE reduction are heating up, which is not good for gold prices
Although the Fed has not formally released a signal to reduce QE, as its pace of withdrawing from the ultra-conventional easing policy is approaching, central banks in many countries around the world have also begun to take precautions and vaccinate their policies in advance.
At present, many market participants have considered the Jackson Hole Global Central Bank Annual Meeting in August this year as an excellent opportunity for the Fed to communicate its QE reduction strategy, and may officially take action later this year, which will undoubtedly intensify the global The financial market is facing turmoil in the second half of this year.
For some advanced economies, returning to the pre-pandemic situation means that central banks need to start formulating plans and schedules to withdraw from stimulus measures in advance. At the same time, the central banks of the more vulnerable emerging economies need to strengthen the defense of their financial systems to withstand large-scale capital flight similar to the 2013 “shrink panic”).
Former Bank of Japan official Tohide Kiuchi said that there is a huge gap between those economies that have escaped the epidemic and those that are still lagging behind. Some central banks in emerging markets may have to raise interest rates to prevent a sharp depreciation of their currencies, even if the price is to harm the still fragile economies of these countries.
Some central banks of advanced economies have already begun to take precautions, and even took the lead in withdrawing easing measures before the Fed.
In April of this year, Canada became the first country in the G7 to withdraw stimulus measures during the pandemic. The Bank of Canada also hinted that it might start raising interest rates in 2022. The Bank of England also slowed down its weekly bond purchases in May, slowing its weekly bond purchases from the previous 4.4 billion pounds to 3.4 billion pounds. It is expected that the bond purchase plan will end around the end of this year.
In addition, the Norges Bank announced a plan to raise interest rates in the third or fourth quarter of 2021. The Reserve Bank of New Zealand and the Bank of Korea also recently hinted in a high profile that as the situation improves, policy tightening has been put on the agenda.
Although the decision-making adjustments of these central banks are mainly driven by considerations of domestic factors, none of the central banks will remain indifferent to the possibility that the Fed may eventually withdraw its stimulus measures.
Even the Bank of Japan may see an opportunity to withdraw its stimulus measures. In the past ten years of this global economic cycle, the Bank of Japan has hardly changed its ultra-loose monetary policy. However, Tohide Kinoui, who currently works at Nomura Securities, said that the Fed’s interest rate hike may give the Bank of Japan a perfect opportunity to normalize its currency without worrying too much about triggering a surge in the yen.
With the Fed’s approach to reducing QE, many emerging economies are undoubtedly facing the greatest pressure right now. The Fed’s tightening policy has caused turmoil in emerging markets many times in the past, and the most impressive is undoubtedly the large-scale outflow of funds from emerging markets in 1998 and 2013 when the Federal Reserve raised interest rates.
Some analysts still warn that the lessons learned during the Asian financial crisis may not apply to the current shock caused by the pandemic. Former Bank of Japan official and current economist at Tokyo Ichikichi Securities Co., Ltd. said that this crisis is different from other crises in that it is neither a financial crisis nor an economic crisis. The current imbalance in the global economy has brought various risks to emerging economies.
The ECB maintains easing expectations to support gold prices
Officials of the European Central Bank will decide on Thursday how much monetary policy stimulus measures need to be implemented as the euro zone gradually lifts its anti-epidemic blockade during the summer. In order to curb borrowing costs, the central bank had earlier increased the scale of debt purchases in the second quarter. Now, officials need to determine the pace of debt purchases in the coming months.
Most economists expect that the central bank will maintain the current policy for another three months. But the management committee is unlikely to set clear goals publicly, forcing investors to interpret the meaning hidden between the lines in the policy statement, new economic forecasts and the content of President Lagarde’s press conference. The policy decision will be announced at 19:45 Beijing time, and Lagarde will hold an online media conference in 45 minutes.
The key statement to note is whether the European Central Bank is expected to purchase bonds under the pandemic emergency bond purchase plan “much faster than the first few months of this year”. This is the expression used at the last meeting of the central bank and reflects the policy decision made in March. At that time, the US economic recovery was likely to have a spillover effect, leading to a rise in euro zone bond yields, which would damage the fragile economy. Officials decided to review this decision at the end of the quarter.
According to the central bank’s 1.85 trillion euros (2.3 trillion US dollars) debt purchase plan, the current weekly net purchases are about 20 billion euros, higher than the 14 billion euros per week at the beginning of the year.
Most economists said that they no longer expect a significant reduction in purchases in the next quarter. Previously, officials including Lagarde have refuted the view that the economy can withstand this approach. However, thin summer liquidity may cause a slight slowdown in the pace of debt purchases, and Lagarde is expected to try to downplay its importance.
Lagarde is unlikely to talk about withdrawing from emergency measures this week, but the topic has begun to receive increasing attention in certain parts of the euro zone. Rising prices and sub-zero interest rates have made central bank critics even more justified, especially in Germany, which is about to hold a general election in three months.
Economists predict that the anti-epidemic bond purchase plan will end in March 2022 as scheduled. After that, many people believe that the central bank’s past asset purchase plans will be intensified. However, technical flexibility is insufficient, so the French central bank governor Francois Villeroy de Galhau’s proposal for adjustments has aroused some people’s interest.
Bitcoin rebounded and the funds flowing into the gold market are expected to decrease
Bitcoin has risen 9% in the past two days, marking its strongest two-day gain in about two weeks, but this has failed to dispel doubts about the vulnerability of the virtual currency after its plunge in May.
JPMorgan Chase’s team of strategists headed by Nikolaos Panigirtzoglou said that although this momentum may be cheering for the bulls, the spot premium in the Bitcoin futures market is a reason to be cautious.
JPMorgan Chase wrote in a report on Wednesday: “We believe that the return of spot premiums in recent weeks is a negative sign pointing to the bear market,” adding that Bitcoin’s relatively low share of the total market value of cryptocurrencies is another. A worrying trend.
Traders are waiting for the next catalyst to push Bitcoin to break through the $30,000 to $40,000 range. Bitcoin has been fluctuating in this range since its plunge from a record nearly 65,000 USD in April.
JP Morgan’s analysis looks at the 21-day rolling average spread between the second round of Bitcoin futures and the spot price. This shows that the spot premium is an unusual development, reflecting the current weak demand for Bitcoin by institutional investors who use contracts listed on the Chicago Mercantile Exchange (CME).
JPMorgan Chase stated that the Bitcoin futures curve was at a spot premium for most of 2018. During this year, the cryptocurrency fell by 74% after experiencing an astonishing boom.
At the same time, data shows that Bitcoin currently accounts for 42% of the overall market value of cryptocurrencies, a sharp drop from about 70% at the beginning of this year. In the opinion of some analysts, this shows to a certain extent that the retail investor-driven bubble is boosting other cryptocurrencies.
JPMorgan Chase strategists said that Bitcoin’s market share may need to rise above 50% to more easily prove that the current bear market is over.
The market pays close attention to the US May inflation data to be announced later
US May CPI data will be released at 20:30 today, Beijing time. The current disagreement between the market and the Fed lies in whether the upward trend of inflation will be short-lived or will be more permanent, and how the two main goals of the Fed’s monetary policy should be weighed between weak employment and fierce inflation.
If the answer starts to lean towards the latter, then the Fed may be forced to abandon the easing policy of keeping interest rates low and increasing liquidity early. The U.S. CPI increased by 4.2% year-on-year in April, which has greatly exceeded market expectations and has hit a new high since September 2008. As soon as the data was released, it increased market concerns about price issues. In this context, the U.S. dollar index and U.S. bond interest rates fluctuated sharply.
According to forecasts, the US CPI rose 0.8% month-on-month and 4.8% year-on-year in May. In May, the core CPI rose by 0.6% month-on-month and 3.6% year-on-year. The growth rate will hit a new high since February 1993. Among them, the continued upward trend of energy transportation and second-hand car prices will also be the main driving force for the upward trend of CPI. In addition, the bottoming out of consumer demand and prices for rent, clothing, entertainment, etc. will also become important factors in boosting CPI and core CPI upward. Increment.
Moreover, these levels of consumer prices, especially rents, have a relatively high weight and there is a certain degree of rigidity in the upward direction, which will make the core CPI easy to rise and difficult to fall. From the trend point of view, it can also be found that the core CPI of the pressure peak in the next four quarters will be higher than the CPI.
Having learned the lesson of higher-than-expected inflation in April, the market has made a fuller expectation of inflation in May, and the consensus expectation has reached an increase of 4.7%-5%. Unless the actual published data soars above 5%, the impact of published inflation data on risky assets will not be overly obvious.
From the perspective of the ten-year debt-free interest rate, its response to inflation expectations began to fall unexpectedly since mid-May, which may indicate that the market is numb to the Fed’s attitude of allowing inflation to rise.
Pay attention to the US two-party infrastructure plan negotiations
On Wednesday, local time, the U.S. bipartisan Senate panel stated that the panel members had reached a preliminary agreement on the new infrastructure plan. The day before, US President Biden announced that he and the Republican Party had suspended negotiations on the infrastructure bill due to differences that could not be bridged.
Although Biden and the negotiating team led by Republican Senator Capito stopped talking, the two parties’ negotiations on the infrastructure bill have not completely broken down, and some senators on both sides are willing to continue negotiations.
According to Republican Senator Romney, the bipartisan Senate team has a preliminary plan, which is estimated to be close to 900 billion U.S. dollars. There is still a gap between this number and Biden’s plan. Biden’s initial proposed infrastructure plan totaled US$2.3 trillion, which was later reduced to US$1.7 trillion during negotiations. However, there are media reports that Biden’s real bottom line is 10,000. One hundred million U.S. dollars.
The biggest dispute between the two parties on the infrastructure plan is the tax increase. Capito had previously stated that the tax issue is the bottom line of the Republican Party. In this regard, Romney said that the new infrastructure bill will not increase taxes. Republican Senator Rob Portman believes that tax increases are a huge mistake. Democrat Jon Test also said that he is willing to consider raising funds for infrastructure projects without increasing taxes.
According to Biden’s original vision, he will raise the corporate income tax rate so that the rich will pay for the hugely expensive infrastructure bill. To this end, U.S. Treasury Secretary Yellen actively promotes the world’s lowest corporate tax, the purpose of which is to prevent multinational companies from moving to low-tax countries to avoid taxation.
Romney and Portman revealed that the Senate team has not finalized the final total amount of the infrastructure plan, and is currently discussing how to fund the infrastructure plan, including using the unemployment benefits issued by the Ministry of Finance during the epidemic. Some states have already allocated some of the funds. Unemployment benefits are returned to the Treasury Department, but Portman also pointed out that the Democratic Party may oppose this funding mechanism.
The World Gold Council said that one-fifth of the world’s central banks will increase gold reserves this year
According to the latest survey by the World Gold Council (WGC), central banks of various countries expect gold to continue to play an important role in their reserves. Nearly one-fifth of the central banks are expected to increase their gold reserves this year, and no central bank is expected to sell gold this year. .
On Tuesday, local time, the World Gold Council announced the results of its fourth annual central bank gold survey. A total of 56 central banks participated in the World Gold Council survey this year, setting a record, compared with 51 in 2020.
The survey shows that 21% of central banks expect to increase their gold reserves in the next year, which is relatively flat compared to 2020. In addition, no central bank is expected to sell gold this year, and 4% of central banks in the survey last year expected to sell gold.
WGC wrote in the report: This year’s survey continues to highlight the strong interest of central banks in gold. In the context of the new crown epidemic, it highlights the importance of maintaining liquidity and irrelevant assets in the reserve portfolio. Inflation has also become an investment consideration again, and may affect the central bank’s asset allocation in the next few years. We believe that central banks will continue to be net buyers of gold, although the purchase volume is slightly lower than the level of the past 10 years.
Although some central banks expect to increase gold reserves this year, the World Gold Council pointed out that from the survey results, central bank officials are not sure about the future trend of global gold reserves: only 52% of respondents believe that global central banks in the next year Gold holdings will increase, which is much lower than last year’s 75%.
Although central banks are expected to remain net buyers of gold, the World Gold Council stated that the motivation behind buying gold this year has changed. Among 79% of respondents, the performance of gold during the crisis was the primary reason for their holdings of gold.
Analysts said that this factor ranked fourth and second in 2019 and 2020 respectively, and has now risen to the first place. This progress may reflect the central bank’s increasing emphasis on mitigating the crisis and may recognize that gold is in the COVID-19 pandemic. Strong performance. Other reasons why central banks hold gold include the long-term value of gold and its role as a portfolio diversification tool.