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2020-06-29 Golden Weekly Report-rising geopolitical risks and the second outbreak of the epidemic

2020-06-29


◆ Content summary:

The price of gold rose last week, and London Gold now closed at US$1770.45 per ounce, with an amplitude of 2.22%, and the lowest hit US$1779.38 per ounce. The latest data released by the US Commodity Futures Trading Commission (CFTC) showed that COMEX gold non-commercial total holdings increased and net longs increased. As of the week of June 23, non-commercial net longs increased by 27,609 lots to 251,957 lots, an increase of 12.31%. SPDR recently Holding positions increased by 19.59 tons to 1,178.90 tons.

After the U.S. economy restarted, the number of newly diagnosed cases rose to a high of 40,000. The number of newly diagnosed cases hit a record for the highest single-day surge in history. 11 states announced the extension of the economic restart time, and the repeated epidemics suppressed the market. Risk appetite. In addition, geopolitical risks have increased. After Europe announced its reopening, it temporarily suspended its opening to the United States due to the epidemic. Trade friction between the United States and Europe has also increased. The United States intends to impose tariffs on US$3.1 billion worth of goods imported from the European Union. It has never been eliminated. Following the passage of the "Hong Kong Autonomy Act" by the Senate, the Trump administration announced on Friday (26th) that it would impose visa restrictions on Chinese officials who harm Hong Kong's autonomy, human rights and fundamental freedoms, and issued new warnings to Huawei. .


◆ Conclusions and suggestions:

The main reasons for the rise in gold prices last week: First, rising oil prices have led to an increase in inflation prospects, and second, the decline in the yields of 10-year and two-year US Treasury bonds has reduced the cost of holding gold. Gold prices are expected to seek to re-challenge the recent highs, as the US stock market is beginning to show signs of a possible decline. Investors will reconsider their long stock positions, the strength of the recovery, the resurgence and lockdown of the new crown epidemic. It is expected that people will turn to the gold market again.

This Thursday (2nd) the Fed will announce the minutes of the June interest rate meeting. Previously, the Fed maintained the interest rate corridor at a historical low of 0-0.25% at the June interest rate meeting. Fed officials expect that the zero interest rate policy will be maintained until at least In 2022, and continue to maintain the current QE easing unchanged, officials at the meeting discussed the yield control policy, but the conclusion is still inconclusive. Therefore, the meeting minutes to be released by the Fed this Thursday (2nd) can be reviewed Details of officials' discussions on YCC policy. In addition, on Friday (3rd) the United States will announce the June new non-agricultural employment report, which is also the focus of this week's data. Gold prices are expected to fluctuate around US$1780/oz this week, and London Gold is currently operating at US$1710-1800/oz.

 

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Market news last week

1. The Federal Reserve voted to approve the changes to the Volcker rule, which will take effect on October 1st

News on June 26, Beijing time, the Federal Reserve voted to pass the Volcker rule 4-1, and Fed Governor Brainard voted against it. The Federal Reserve announced in its statement that the revision of the Volcker rule is complete, which will take effect on October 1. This news triggered a collective rise in U.S. bank stocks. As of press time, Wells Fargo, Morgan Stanley, JP Morgan Chase, Bank of America, and Goldman Sachs have gained more than 2%.

The “Volcker Rule” was promulgated by Obama in January 2010. It was proposed by Paul Volcker, Chairman of the Obama Administration’s Economic Recovery Advisory Committee. The content mainly bans proprietary trading in the banking industry. Separation of business transactions from commercial banking business means that banks are prohibited from using deposits covered by federal deposit insurance for proprietary trading, investing in hedge funds or private equity funds. The responsibility of this rule is to reduce the risky investment behavior that triggered the current round of financial crisis. It once prompted banks such as Goldman Sachs to close their proprietary trading business.

The "Volcker Rule" has always been regarded as synonymous with provoking the interests of Wall Street. Critics complained that this measure was used to disperse the pressure on the Democratic Party’s political dilemma, and that this rule is not practical, it puts U.S. banks at a disadvantage in competing with European banks, and the goal is wrong. It will make some investment banks slip through the net. Critics believe that although the regulations are full of 298 pages, they still lack a clear distinction between proprietary trading and market-making transactions, leaving a large gray area for banks to expand the ratio of hedge fund and private equity investment.

 

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