Will the Fed add fuel to the record breaking gold price?

category:Finance
 Will the Fed add fuel to the record breaking gold price?


The attack of the novel coronavirus pneumonia on global economic growth further consolidated the position of gold as a hedge asset, and investors poured into gold. Since the beginning of this year, the amount of funds flowing into gold ETFs has exceeded the level of 2009, and the total position has also reached a record high of more than 3300 tons.

US dollar falls, gold hits new high

In March, the dollar, once a safe haven for investors, saw a surge, but it began to sell off after the stock market plummeted in March. The novel coronavirus pneumonia epidemic has been losing momentum in the US, and the US dollar is currently in its worst monthly performance since 2018, after the July crash.

Over the past few years, investors have tended to be bullish on the US dollar, but things seem to have changed since the second quarter of this year, with the Federal Reserve slashing interest rates and the US dollar is being affected by US political activities. Investors have withdrawn a large number of long positions in the US dollar in the past month, and even some traders have begun to turn into short positions in the US dollar. The dollar index has fallen by more than 2.5% since July, and the yield of five-year treasury bonds has also fallen to an all-time low of 0.2548%.

Ray Dalio, founder of bridge water fund, also was not optimistic about the recent performance of the US dollar in a speech on the 26th. He said that as geopolitical conflicts intensified, it could evolve into a capital war, which would further pressure the dollar. He also warned that loose monetary and fiscal policies, as well as differences in social ideology, also made the outlook for the U.S. economy less optimistic.

The stability and value of the dollar has been challenged by factors such as trade friction and geopolitics, Dalio said. Now my biggest concern is whether the United States has enough money, because we cant continue to solve the problem of insufficient funds by expanding the deficit, selling debt or printing money. It is the right way to keep the dollar stable by constantly increasing productivity, making income and expenditure surplus, and at the same time establishing and maintaining a stable balance sheet.

Institutions are optimistic about the $2000 mark

Most analysts are more confident in gold as it continues to rise and is closer to the major institutions targets for gold. Goldman Sachs expects gold to reach $2000 in the next 12 months, while Citigroup sees a 30% chance of gold breaking through $2000 by the end of this year.

And the key person to help the gold price hit $2000 will be the Federal Reserve. A novel coronavirus pneumonia conference will be held in from July 28th to 29th. The Federal Reserve will continue to keep interest rates at close to zero and repeat the previous guidance to keep monetary policy unchanged until the economy gets rid of the impact of the new crown pneumonia epidemic and returns to the right track. Although the tone of this weeks meeting has been set, investors expectations of a recovery in US economic growth have dimmed. Their expectations for more easing signals from the Federal Reserve in future interest rate meetings have also become increasingly high, especially as business conditions remain weak in the near future, manufacturing activity in most parts of the United States has been slow to recover, and activities in the agricultural and energy sectors have further declined. Wang Xiaowu: editor in charge of this article_ NF

And the key person to help the gold price hit $2000 will be the Federal Reserve. A novel coronavirus pneumonia conference will be held in from July 28th to 29th. The Federal Reserve will continue to keep interest rates at close to zero and repeat the previous guidance to keep monetary policy unchanged until the economy gets rid of the impact of the new crown pneumonia epidemic and returns to the right track.

Although the tone of this weeks meeting has been set, investors expectations of a recovery in US economic growth have dimmed. Their expectations for more easing signals from the Federal Reserve in future interest rate meetings have also become increasingly high, especially as business conditions remain weak in the near future, manufacturing activity in most parts of the United States has been slow to recover, and activities in the agricultural and energy sectors have further declined.