Source: Zijin Tianfeng Futures Research Institute
[20240527] Gold: has gold gone crazy?
Summary of viewpoints
Last week, it was influenced by strong business activity in the United States and the hawk minutes of the Fed's May FOMC meeting.BaccaratjamjarThe price of spot gold in London recovered sharply after breaking through new highs, falling 3% throughout the week.Baccaratjamjar.34% to $2333.8/oz. At the same time, 10y UST rose 4.1bps to 4.46 per cent and the dollar index rose 0.24 per cent to 104.7, in line with gold's interest rate logic. Looking back, the Fed's favorite inflation indicator, PCE, will be released this week, considering that the market has already price in the April core PCE may slow to its slowest level so far this year, unless the published value deviates significantly, gold prices are expected to fluctuate within a narrow range of current positions in the short term.
Recently, gold fluctuated inversely with interest rates and US dollars, and the logic of interest rates returned, so did the anti-inflation logic of gold fail? Gold has been hitting new highs since March, which we attribute to gold's anti-inflationary logic. The US fiscal deficit continues to worsen before recession, which on the one hand causes financial conditions to relax, creating "artificial" inflation bumps, and on the other hand arouses other economies' mistrust of the US dollar as a sovereign credit currency. As the debt outlook is difficult to improve in the short term, anti-inflation logic is the long-term driver supporting the rise of gold, while for interest rate logic, the end point of this round of monetary policy is nothing more than a cut in interest rates, and it will be extremely difficult to raise interest rates in an election year. As a result, interest rate logic is only a short-term driver in a large cycle, and the convergence of interest rate reduction expectations will not lead to gold prices falling blindly.
Overseas main interest rate
Us business activity is strong, Fed minutes rein in expectations of interest rate cuts
Last week, under the influence of strong US business activity in May and the hawkish tone of the FOMC minutes, the full-year rate cut implied by interest rate futures narrowed to 33.4bps, the first rate cut was postponed to December, and the expected curve of rate hikes moved slightly higher. In terms of economic data, S & P global business activity grew at the fastest pace in two years in May, with manufacturing PMI 50.9 (expected 49.9), service PMI 54.8 (expected 51.2) and composite PMI 54.4 (expected 51.2). In addition, after further assessment, consumers are less pessimistic about the trajectory of inflation, with the final value of one-year inflation expectations at the University of Michigan and the final value of inflation expectations for 5-10 years both revised down 0.1 per cent in May. On the Fed briefing, the minutes of the FOMC meeting had a clear hawkish tone, with participants saying there was considerable uncertainty about the current limitations of monetary policy, and many policy makers supported further tightening if necessary.
2y UST yield returns to the level at the beginning of May
Last week, each term UST upward, short-end interest rates are more sensitive to the convergence of interest rate cut expectations, 10y UST uplink 4.1bps to 4.463% Magi 2y UST uplink 12.6bps to 4.953%. Judging from the attitude of Fed officials, apart from the dovish attitude of Central Bank Governor Colin Powell, Atlanta Governor Bostic (voting rights), who spoke last week, said that "the central bank will be able to start lowering interest rates by the end of the year." But it is unlikely before the fourth quarter, Fed governor Barr (voting rights) said that "we may stay on hold for longer than previously thought", Cleveland president Mester (voting rights) said that "do not think the expectation of three interest rate cuts in 2024 is still appropriate", the speech is hawk, leaving Move Index at a low level.
ONRRP usage decreased
ONRRP usage fell to $431.2 billion last week, down $58.5 billion from the previous week.
The Fed's reserve balance fell to $3.375 trillion on Wednesday, down 41 billion from the previous week.
Short and long positions in US bonds are short.
As of May 21, US bond interest rates were short, 2-year UST futures non-commercial net short positions increased by 28683 to 993669 hands, and 10-year UST futures non-commercial net short positions increased by 53161 hands to 400972 hands.
The net long investor sentiment in JPM Treasuries was higher than in the previous week and was at odds with the Treasury position data.
Us real interest rate
5-year and 10-year TIPS yields rose, with 5-year TIPS yields closing at 2.2% on Friday, up from 8 bps the week before, and 10-year TIPS yields at 2.14% on Friday, up 4bps from the week before.
Dollar Index and liquidity
Main components of dollar index
Last week, the dollar index moved in reverse with the price of gold. Gold fell 3.34% and the dollar index rose 0.24% to 104.7. The rolling correlation between the two is higher.
Dollar index position
As of 5.21, the total position of the US dollar index decreased, the ratio of non-commercial long positions decreased by 1390 to 28200, and that of non-commercial short positions decreased by 2473 to 24700. In terms of the proportion of non-commercial long positions, the proportion of non-commercial long positions was 71%, which was higher than that of last week, while that of short positions was 62%, which was lower than that of last week.
Offshore dollar liquidity
Last week, the yen's three-month Basis Swap was lower than the euro's three-month Basis Swap, while offshore dollar liquidity funding costs were higher.
High frequency indicator of inflation
Inflation expectation
The copper-to-gold ratio rose to 4.41 last week, with copper prices falling less than gold, indicating a marginal rise in global demand momentum.
Price comparison and volatility
Various price comparisons of gold
Gold and silver rose higher than shock, mainly because gold fell less than silver last week; gold and copper fell slightly, mainly because gold fell more than copper last week; gold and oil fell month-on-month, mainly because cloth oil rose and gold fell.
Correlation between gold and major assets
From the perspective of rolling correlation, gold has a higher correlation with the dollar index and copper and a lower correlation with crude oil.
Price difference and price comparison
The internal and external spreads between gold and silver fell last week.
Inventory, position
Gold and silver inventory
On the inventory side, COMEX gold stocks last week were 17.5636 million ounces, an increase of 103900 ounces month-on-month, COMEX silver stocks increased to 298.5149 million ounces, an increase of 514300 ounces; last week, SHFE gold stocks were about 7.719 tons, an increase of 0.387 tons month-on-month, while SHFE silver stocks fell 11.14 tons to 741.723 tons.
ETF positions in gold and silver
SPDR gold ETF positions fell 6.33t to 832.21 tonnes month-on-month, and the current position size is near the 10-year median.
SLV silver ETF position increased by 58.27 tons to 13101 tons from the previous month, and is currently at a mid-high level.
COMEX Gold position (one week behind)
As of 5.21, the total position in comex gold increased by 7639 to 531000, of which non-commercial long positions increased by 23087 to 301000, while short positions decreased by 2223 to 71000, indicating an increase in the long strength of the gold configuration.
In terms of position share, non-commercial long positions increased to around 57%, while non-commercial short positions decreased to around 13%.