FX168 Financial News (Hong Kong) - In the morning of Asian market on Tuesday (November 20), international spot gold was at the level of 1221.80 dollars/ounce. Last trading day Gold price Georgia continued to rise steadily and closed up on a positive basis for the fifth consecutive trading day, reaching a peak of 1225.10 dollars/ounce, approaching the high of 1225.20 dollars/ounce last Friday (November 16), and finally closing at 1224.00 dollars/ounce. Market analysts pointed out that in the next few weeks, gold is expected to consolidate in the range of $1200-1250/ounce until a new effective catalyst appears.
At the same time, the US dollar retreated and fell all the way. As officials of the Federal Reserve (Fed) expressed concern about the slowdown of global economic growth, the market speculated that the Federal Reserve might suspend interest rate hikes at some time in 2019, which undoubtedly made dollar bulls "timid", thus pushing the US dollar index down to 96.12 low and further boosting gold.
In addition, the latest data showed that hedge funds and fund managers' gold net short positions rose to the highest level in five weeks.
Top investment banks are short of dollars
On Monday (November 19), the US dollar index further accelerated its decline, while major non US currencies and spot gold and silver rose. Last week, officials of the Federal Reserve unexpectedly made dove like remarks, and more and more people expected that the US economic growth might have peaked. The US dollar was under pressure to decline, while the voice of shorting the US dollar was gradually heard in the market. Morgan Stanley, Goldman Sachs, Citigroup and other well-known investment banks all said they were bearish on the US dollar prospect. As the US dollar declines, crude oil The market and the US stock market also fell.
The US dollar unexpectedly became the winner in 2018. Due to interest rate rise and strong economic data, the US dollar index has risen by nearly 10% since the low point in April. But more and more people believe that the US economic growth may have peaked, and this view has begun to erode these gains.
According to the latest report released by Goldman Sachs, the US dollar is expected to weaken in 2019 as the US economy slows down to a level more consistent with the global average.
Goldman Sachs said in its report, "We have seen some changes in the global economic environment, coupled with a few medium-term negative factors, which indicate that the US dollar is more likely to fall than rise in 2019."
Goldman Sachs believes that although the Federal Reserve has been steadily raising interest rates and seems to continue to do so, the market may have absorbed most of the impact of interest rate rises. Further tightening of monetary policy by the Federal Reserve will not bring insurmountable risks to the market. For example, although we expect the interest rate increase in 2019 to be twice as large as the current market expectation, it is expected that 11 of the 13 interest rate increases by the Federal Reserve in this cycle have occurred or have been digested by the market. Therefore, it can be said that the financial market has largely absorbed the interest rate rise of the Federal Reserve.
Goldman Sachs also pointed out that even if the US interest rate rises faster than expected, the slowdown in US economic growth often leads to a decline in US dollar returns, especially against G10 currencies, but to some extent, this is also true against emerging market currencies.
However, Coincidentally, Citigroup, another top investment bank in the world, also released the latest report, raising concerns about the weakening of the US dollar.
The initial research report of Citi pointed out that the dollar will weaken next year as the boosting effect of fiscal policy on the economy weakens and the rising interest rate begins to hurt the economy. After climbing 1% in the next three months, the US dollar will fall by about 2% against G10 currency in 6-12 months.
Jeremy Hale, an analyst at Citigroup, and others said in the report that both the absolute growth of the U.S. economy and the relative cyclical victory will slow down, and the yield advantage enjoyed by the U.S. dollar will not be so sustainable.
Analysts said, "In the medium term, we believe that the financial support for growth will eventually fade, and the tight monetary policy will start to hurt the economy."
In addition, Morgan Stanley has also written that the bull market of the US dollar has ended, and it is time to short.
Hans Redeker, global head of foreign exchange strategy of Morgan Stanley, pointed out in a report that it is believed that the US dollar has reached its peak near the current level. Against the background of deflation pressure and falling oil prices, the dollar may weaken as credit spreads expand, stock prices fall and sovereign bond yields begin to decline.
(Source of dollar index trend: Zerohedge, FX168 financial network) Italy's budget problem remains unresolved. Gold is like holding a "time bomb"
Last week, the Italian government vetoed the content of the 2019 budget draft, which triggered market concerns about the EU's initiation of disciplinary punishment measures against Italy this Wednesday.
On Monday (November 19), foreign media reported that a senior Italian government official said that the main part of the 2019 budget draft would not be revised, but if necessary, Italy had 1000 ways to improve it.
According to the Italian Post, the government may decide to reduce debt by increasing profits. Stefano Buffagni, the deputy minister in charge of regional affairs of the cabinet, said that it might consider selling the shares or real estate of the enterprise.
Buffagni claimed that the government was looking for ways to reduce the yield spread of Italian German bonds, which absolutely reflected that the Italian government wanted to reconcile the stalemate with the EU, although Brussels did not have to play a game through Italian budget issues.
In addition, it is reported that the Italian government is willing to sell real estate assets, reduce waste and introduce protection clauses to ensure that the budget deficit rate in 2019 will not exceed 2.4%, but the main reforms in the budget draft will remain unchanged.
The market will pay close attention to whether the EU will launch disciplinary punishment against Italy this week. Once launched, the Italian government will face a fine of up to 3.4 billion euros.
Once the conflict between Italy and the European Union escalates again, the risk aversion in the market will spread instantly, and gold will be further boosted. If the two sides find a proper solution to the budget problem, gold will be suppressed.
Britain's Brexit Deadlock Continues, Fearing to Ignite the Crisis at Any Time
On Monday (November 19), British Prime Minister Theresa May delivered a speech at the Conference of the Confederation of British Industry (CBI) to promote her agreement with the European Union on the withdrawal from Europe. Mei's speech received particular attention last week when several senior government officials resigned because of dissatisfaction with the agreement and Mei may face leadership challenges.
Teresa May first stressed that the Brexit document released this time represents a major breakthrough, but it is not a final agreement. There will also be intense negotiations this week.
As for the future relationship with Europe, Teresa May said, "Our geographical location has not changed, Europe will still be our largest product market, and the agreement I reached with the EU will ensure employment and prosperity."
Teresa Mayand said that she would try her best to obtain the best Brexit agreement in the coming weeks, and then submit it to the parliament to verify whether it is in line with the national interests.
Theresa May pointed out that reaching an agreement has never been simple and direct. The final stage is usually the hardest. But we have prepared a workable agreement for Britain.
As for Britain's indefinite extension of the transition period, which was previously feared by the Brexit, Mei said that the government believed that it would not extend the transition period, but this was an option. The details of the extension of the Brexit transition period need to be negotiated. It is important that the transition period will end at the latest before the next general election of the UK (June 2022).
Teresa May will meet Juncker this week. Katya Adler, the BBC's European political editor, said that the European Commission pointed out that Teresa May would only meet Juncker this week after the political declaration on future relations between the UK and the EU had made substantive progress. The contents of the negotiations in this regard continued last weekend and are expected to be announced later on Tuesday.
The political situation in Europe has always been the main indicator of market sentiment. The farce of Brexit between the United Kingdom and the European Union has lasted for so long, which makes investors "walk on thin ice". Once the two sides "talk about collapse" again, it will ignite a storm of risk aversion at any time, and gold will once again become the "favorite" of the market.
Prospects for future gold market
Against the background that the US dollar continues to fall back and the top investment banks are also short of the US dollar, it seems that gold will usher in a "beautiful spring".
Scotiabank pointed out in the Metal Affairs Precious Metal Report in November that with a wave of risk aversion sweeping the financial market, inflationary pressure is rising, and gold has the potential to further rise.
According to the bank's report, as the US trade dispute continues, economic leaders such as base metals are still under pressure. As other markets begin to become more risk averse, it is more favorable for the gold prospect. Therefore, with the transfer of funds from the stock market and bond market, there seems to be room for safe haven demand for gold.
At the same time, Hussein Sayed, chief market strategist of FXTM, said that before the emergence of new catalysts, gold will continue to consolidate in the range of 1200-1250 dollars/ounce. The new catalysts may be the Brexit negotiations or the progress of the G20 meeting between the United States and China. If we hear more dove talk about the tightening cycle, it will drag down the dollar, thus boosting the strength of gold again.
Sayed also pointed out that the policymakers of the Federal Reserve raised concerns about the possible slowdown of the global economy, which led to doubts about how far the tightening cycle could go, and the dollar continued to retreat and weaken. So far this year, the Federal Reserve has raised interest rates three times, making the holding cost of interest free income gold higher. It is expected that the fourth interest rate increase will be carried out next month.
In addition, fxleaders, a foreign institution, wrote an analysis of gold trend, pointing out that gold bulls entered the market last week after Federal Reserve officials expressed concern about the global economic outlook. We have short below 1220, targeting $1217.
At present, gold is still facing significant resistance near 1223. The gold price has closed a short swallow pattern below 1223, which indicates that traders have a bearish tendency.
In terms of trading strategy, the agency pointed out that if the gold price breaks through 1223 dollars/ounce again, it will further rise to 1236 dollars/ounce. If the gold price continues to be limited below $1223/ounce, it will continue to be bearish, and then the target will be $1217 and $1213/ounce.
(Daily line chart of spot gold source: FX168 financial network) At 09:30 Beijing time, spot gold was reported at 1221.80 dollars/ounce.
Checked by: TIER
Editor in charge: Tang Jing
