Jim Wyckoff, senior analyst in precious metals at kitco metals, said that the reason why gold has stood at the highest level in the past 30 days is mainly supported by Goldman Sachs, a large investment bank.
Last Friday, novel coronavirus pneumonia (GoldmanSachs) suddenly released a report raising the price of gold, which means that gold prices will reach $2000 / ounce in the coming year, because real interest rates are low, the dollar is weakening and investors are worried that the new crown pneumonia crisis will cause currency competitive depreciation.
The Goldman report came at the right time. Jim Wyckoff said that at that time, financial markets were worried about the resurgence of the U.S. epidemic and the risk of high valuation of U.S. stocks, so they sold U.S. equity assets and turned to gold as a safe haven.
Goldman, however, backed the bullish price, which appears to have lasted only one trading day.
In the early morning of June 22, Comex gold rose to 1776.7 USD / oz. after a mysterious selling wave, the gold price turned down again.
Behind this, there is a growing divergence among investment institutions over whether the Feds over issuance of money will trigger inflation. Ross Strachan, a commodity economist at capital economics, told reporters that although Wall Street investment institutions have been worried that the Feds unlimited QE measures will push up inflation expectations, at present, the CPI in the United States has not seen a significant recovery, so many investment capital seize the opportunity of Goldman Sachs to support the gold price and snipe at the gold bulls. In the short term, the winner of this long-term game depends on whether the dollar index bottoms out and rebounds, but in the medium and long term, it depends on whether the epidemic returns and whether the global economy is once again in recession.
A Wall Street hedge fund manager who has long allocated gold told reporters that there have been many strange phenomena in the gold market in the past period, such as the worlds largest gold listed exchange fund ETF, SPDR gold trust, which has realized a net inflow of funds for 13 consecutive weeks, but the price of gold has been hovering between 1680-1730 US dollars / ounce.
Now, these investors are starting to snipe at gold bulls.
In fact, many hedge funds and retail investors have increased their positions in gold because they see that some of the factors that Goldman supports gold prices are being realized. For example, the latest data released by the Commodity Futures Trading Commission on Friday showed that as of the week of June 16, the dollar net position of speculative capital had increased sharply to $15.69 billion, a significant increase of $6.18 billion compared with $9.51 billion the previous week, indicating that the declining trend of the dollar is rising day by day, and gold denominated in dollars will undoubtedly benefit from it.
However, Comex gold futures suddenly rose, but failed to drive spot prices up.
Ole Hansen, an analyst at Shengbao bank, said new hedge buying by hedge funds and retail investors was not enough to push up the price of gold due to the delay in spot gold breaking through $1750 / oz.
Behind this, the demand for physical consumption of gold is still relatively low, especially in the Indian market. Due to the impact of the epidemic and economic downturn, the demand for consumption of gold in India is still at a low ebb, so the gold price continues to strengthen. Said the Wall Street hedge fund manager to reporters. This is also one of the biggest driving forces for many investment institutions to sell gold ETFs again and buy platinum ETF arbitrage.
According to an investment institution trader involved in the arbitrage operation, they actually regard the Goldman Sachs report as a rare opportunity to snipe gold bullion, because they found that hedge funds buying up gold positions in the near future often come from inflation expectations caused by the over issuance of the Federal Reserves currency, but the CPI data in the United States has not recovered significantly, which has created them to expand arbitrage The best opportunity for revenue.
Who is influencing the price of gold
In Ross Strachans view, although the Goldman Sachs report only kept the gold price rising for one trading day, the fierce long short game has just begun.
Since last week, weve noticed that more and more large hedge funds are starting to join the campaign of selling dollars and buying gold. He revealed. For example, Peter Schiff, chief executive of European Pacific Capital, warned that the U.S. fiscal profligacy (i.e. huge fiscal deficit) is shaking the dollars devaluation and its reserve currency status, when gold will once again become the first choice for investment institutions to maintain asset stability.
Scott minerd, global chief investment officer of Guggenheim investments, pointed out that the United States is setting off a huge debt storm and causing a significant depreciation of the dollar. The best strategy to resist this risk is to buy gold.
Historically, the accumulation of gold as a reserve asset has been seen as a responsible policy response in times of crisis. Therefore, in the future, central banks and large investment institutions will notice that gold will become a more and more valuable asset in the wave of global currency overissuance and debt monetization. Scott minerd stressed.
Bob haberkorn, a senior commodity broker at rjo futures, points out that golds higher returns can only be seen if it is held for a significantly longer period. Specifically, if the investment cycle is more than 5 years, the annual return of holding gold is about 5% - 8%, which will be higher than that of bonds and some commodities. In his view, this is also one of the main reasons why gold prices often deviate from market bullish sentiment. At present, what dominates the short-term gold price fluctuation is the arbitrage capital that pursues the high return of short-term price difference. Hedge fund tycoons are more willing to obtain stable returns by holding gold for a long time, and are not likely to intervene the short-term trend of gold price. For now, whether gold can stand at 1800 US dollars / ounce, or even reach 2000 US dollars / ounce expected by Goldman Sachs, depends entirely on whether the outbreak is revived to trigger the warming of global economic recession expectations, so that arbitrage capital can see a more substantial profit margin of buying up, so that there is no longer a high selling of gold ETF to platinum ETF. Bob haberkorn said frankly. Source: responsible editor of 21st century economic report: Yang Bin_ NF4368
Bob haberkorn, a senior commodity broker at rjo futures, points out that golds higher returns can only be seen if it is held for a significantly longer period. Specifically, if the investment cycle is more than 5 years, the annual return of holding gold is about 5% - 8%, which will be higher than that of bonds and some commodities.
For now, whether gold can stand at 1800 US dollars / ounce, or even reach 2000 US dollars / ounce expected by Goldman Sachs, depends entirely on whether the outbreak is revived to trigger the warming of global economic recession expectations, so that arbitrage capital can see a more substantial profit margin of buying up, so that there is no longer a high selling of gold ETF to platinum ETF. Bob haberkorn said frankly.