Last week, the United States launched a trade war against China, which stole the spotlight from the Federal Reserve's interest rate meeting. Global capital market turbulence intensified, and gold, the king of risk aversion, became stronger again. However, silver was also negatively affected by the trade war due to its preference for industrial use, and the gold silver price ratio was significantly stronger.
Main daily line of US Gold:
Main Daily Line of Silver America:
USD Index:
Fundamentals Message
1. Trump signed a memorandum on China's trade and announced that he would levy tariffs of about $60 billion annually on Chinese imports
2. US Treasury Secretary Mnuchin: We are conducting effective dialogue with China and are cautiously optimistic about reaching an agreement.
3. Trump signed a budget proposal of 130 million dollars, and Trump supports the increase of defense and aerospace spending.
4. The Federal Reserve raised interest rates as scheduled, and officials predicted that interest rates would be raised three times this year.
5. US core durable goods orders+1.2% month on month, expected+0.5%.
6. Euro zone manufacturing PMI preview value is 56.6, expected 58.1.
7. The sales of existing houses in the United States is 5.54 million yuan, expected to be 5.41 million yuan.
Monitoring of important indicators
Judging from the main driving indicators of gold, the net surplus of CFTC gold funds decreased by 19217 hands last week, falling back from the high position and driving the gap.
Net gold and CFTC funds
The 10-year TIPS of the United States fluctuates at the level of 0.7%~0.8%, driving neutral.
US 10-year real interest rate vs Gold price
Last week, the gold ETF position increased by 10.3 tons to 850.5 tons, which is more driven.
SPDR gold ETF position and gold price
Main indicators of silver
The net surplus of CFTC silver funds decreased by 15463 to 12516 net short positions, which was driven too much.
Silver CFTC position and silver price
Comex silver inventory increased again, currently 259 million ounces, short.
Silver Comex inventory and silver price
SLV silver ETF position is stable, currently 9893 tons, neutral.
ETF position and silver price of silver SLV
Future prospects
Last week, the United States launched a trade war against China, which stole the spotlight from the Federal Reserve's interest rate meeting. Global capital market turbulence intensified, and gold, the king of risk aversion, became stronger again. As silver is biased towards industrial use, it is also negatively affected by the trade war, and the gold and silver price is significantly stronger..
Last week, the Federal Reserve raised interest rates by 25 basis points as scheduled at its interest rate meeting, raising the target interest rate range of federal funds to 1.50% - 1.75%. The statement of the Federal Reserve released after the meeting said that the economic outlook has strengthened in recent months, economic activity is expected to expand moderately in the medium term, and the employment market environment will remain strong. The risks to the near-term economic outlook are roughly balanced. The inflation growth rate will rise in the next few months, and it will stabilize at about 2%, the target level of the Federal Reserve in the medium term. In the Federal Reserve's economic forecast, the GDP growth expectations for this year and next are raised from 2.5% and 2.1% to 2.7% and 2.4% respectively. The unemployment rate is expected to be lowered from 3.9% and 3.9% to 3.8% and 3.6% respectively this year and next. The core PCE inflation rate is expected to remain unchanged this year, and will be raised from 2.0% to 2.1% next year.
Federal Reserve Economic Forecast
The interest rate forecast "dot matrix" released after the meeting shows that interest rates will be raised three times, three times and twice from this year to the next year. At the end of this year, the median forecast of the federal funds rate was 2.125%, which was the same as that at the last meeting. By the end of 2019, the federal funds rate was 2.875%, and 2.688% was expected last time. About 7 of the 15 officials are expected to raise interest rates at least four times this year, higher than the four at the last meeting.
Federal Reserve Chairman Powell said that the gradual interest rate increase will continue to support the economic situation, and too slow interest rate increase will pose risks to the economy. He said that the tariff policy will not affect the current monetary policy prospects, but more and more Fed officials are worried about trade policy. He believes that asset prices are high in some areas. Powell also pointed out that the degree of financial vulnerability is moderate. Fiscal policy will boost demand, the impact of tax cuts on the economy is very uncertain, and trade has become a more important risk in the economic outlook. Federal Reserve officials said that as the economic situation changes, the Federal Reserve will change its expectations. They understand the trade policy and its impact on the economic outlook, while broader trade measures may affect the outlook.
On the whole, although the median interest rate forecast of the Federal Reserve this year did not exceed expectations, the economic forecast and the number of people who support four interest rate hikes clearly show that they are hawkish. Judging from the market's expectation of the Federal Reserve's interest rate hike, the probability of three and four interest rate hikes this year has continued to rise. The probability of raising interest rates twice has weakened significantly. Last week, the United States officially launched a trade war against China. Trump signed a memorandum on China's trade and announced that he would levy tariffs of about $60 billion annually on Chinese imports. Historically, the US current account deficit has little correlation with the US dollar index. Therefore, even if Trump's trade war can reverse the current trade deficit to a certain extent, it will not help the US dollar. On the contrary, it is more likely that the trade war will drag down the global economy, and may also slow down the US economy, thus bringing negative pressure on the US dollar. The negative impact of the trade war outweighed the positive effect of the Federal Reserve's interest rate increase in the short term, and became the main reason why the dollar index did not rise but fell. The sharp rise in global risk aversion is good for gold. Due to the preference for industrial use, silver was also negatively affected by the trade war, and gold and silver prices were too high.
From the perspective of the main driving indicators of gold, the net surplus of CFTC gold funds decreased by 19217 hands last week, falling back from the high position and driving the gap. The 10-year TIPS of the United States fluctuates at the level of 0.7%~0.8%, driving neutral. Last week, the gold ETF position increased by 10.3 tons to 850.5 tons, which is more driven.
To sum up, the Federal Reserve raised interest rates as scheduled in March, and the wording was slightly hawkish on the whole. The expectation of three and four interest rate hikes this year increased. Although the economic data of the United States is beautiful, the threat of trade war has deepened, which has offset the economic benefits to the US dollar, and the demand for safe haven has returned. Precious metals enter a seasonal shock period. The short-term risk aversion is difficult to dissipate, and it is expected to still support the strong shock of gold, while the pattern of strong gold and weak silver will continue.
Baocheng Futures
Sina statement: The purpose of posting this article on Sina.com is to convey more information, which does not mean to agree with its views or confirm its description. The content of this article is for reference only and does not constitute investment advice. Investors operate accordingly at their own risk.
Editor in charge: Song Peng
