On Tuesday (November 20), influenced by the dove like officials of the Federal Reserve, the dollar index hit a new low of 96.025 since November 8, and spot gold stood above $1220. However, the performance was still expected, and the volatility was small, and it was expected to rise to 1240 in the later period.
The pace of interest rate increase by the Federal Reserve may change, and gold is still subject to the expectation of interest rate increase
ANZ Bank believes that the speech of the Federal Reserve Williams is dovish and based on data, which is consistent with the recent speech of the Federal Reserve officials. The Federal Reserve may make a significant adjustment to the dot matrix in December, and the path of interest rate increase in 2019 will become more uncertain. The previous forward-looking index indicates that the Federal Reserve will raise interest rates three times in 2019, but the market currently believes that it is possible to raise interest rates twice, We expect the Federal Reserve to raise interest rates in December this year and again in the middle of 2019.
Fundamentally speaking, gold is subject to the strong dollar. Only when the interest rate increase is substantially weakened can gold's medium-term weakness be changed, otherwise the gold market will still be weak. Gold In the past five years, Gold price It has been hovering in the fluctuation range of $200. Interest rates have capped gold.
At 21:30 Beijing time on Tuesday, the data of construction permits and new housing starts in the United States will be released successively, which may deteriorate. The US NAHB real estate market index for November released on Monday fell to 60, the lowest level since August 2016, indicating that the real estate boom is weakening. If the data goes bad, the US dollar index will probably be further corrected, and the gold market is still likely to rise. It is expected to float between 1220-1240.
European political situation interferes, and gold shows the nature of risk aversion
British Prime Minister Theresa May vowed to stick to her proposed Brexit Agreement, while dissenting members of the Conservative Party tried to challenge her leadership.
Nomura Securities believes that it is difficult to get the Brexit Agreement passed by the British Parliament, and the trading of sterling will be extremely volatile in the short term.
Rabobank believes that although the UK and the EU have reached a draft agreement on Brexit, the Conservative government cabinet officials have left, and it is still difficult to judge the future progress of Brexit negotiations. The bank said that Prime Minister Teresa May has a good opportunity to save her leadership, and whether her draft Brexit Agreement can successfully break through the parliament remains to be seen.
Considering the huge impact of Brexit progress, the gold market shows the risk aversion and rises, which will become more and more intense in the future.
ANZ predicted that after the resignation of many British cabinet officials, the optimism brought by the Brexit Agreement between the United Kingdom and the European Union faded again. At present, the market doubts whether the Brexit Agreement can successfully pass the British Parliament. Tusk, President of the European Council, said that the Brexit Summit would be held in Brussels on November 25 and the Brexit agreement would be signed. After that, the agreement would need to be approved by the British Parliament, but it seems unlikely at present.
The focus of this week on Italy's budget problem is that the European Commission will respond to Italy's budget problem on Wednesday (November 21). It is expected that the European Union will release a report on Italy's debt, which may be the first step of a disciplinary procedure, and may eventually lead to fines and funds freeze imposed by the European Union on Italy. Italy's debt accounts for more than 130% of national output, which is the second highest debt country in the euro area in proportion, second only to Greece. Gold is expected to show some performance as Italy and the EU differ greatly in hedging demand.
Institutional perspective
Scotiabank believes that with a wave of risk aversion sweeping the financial market and rising inflationary pressure, gold still has the potential to rise, but it is difficult to see an increase in October; With the transfer of funds from the stock market and bond market, there seems to be room for safe haven demand for gold; The geopolitical instability surrounding global trade issues will continue to support inflation pressure, which may help the gold price continue to strengthen; The turning point may be at hand: gold prices and the US dollar are usually stronger in October, so the strengthening of the US dollar may not pose too much resistance to gold prices, because gold is currently at a low level.
Victor Dergunov believes that the sentiment of the gold market has improved, and the gold price will be pushed up accordingly. Previously, the Comex gold position maintained a net short position for 9 consecutive weeks, which is a rare bearish sentiment in the gold market in recent decades.
Future prospects
At present, the bullish sentiment in the gold market is weak, and it is still bullish. Based on doubts about the path of the Federal Reserve's interest rate increase and the risk aversion caused by the European political situation, the short-term target is 1240.
