Gold reversal mystery is inflation

From the beginning of the year to early March, the price of gold fell by more than 14% to a 9-month low of $1,676.69 per ounce. As Bitcoin has risen by more than 10 times in the past year, it has attracted the transfer of global risky assets; and the speed of global new crown vaccination has accelerated, the economic growth of the United States and the world is improving, and the economic improvement has strengthened the market’s confidence in the global economic prospects, thereby promoting U.S. debt Yields rose to a high in more than a year, boosting the U.S. dollar to climb to a three-month high, causing investors to sell non-yielding precious metals; in addition, the economic recovery boosted demand prospects, and international oil prices broke through the highs of the past two years. These have become a pressure on gold. An important factor in the continued weakness.

With the accelerated promotion of the new crown vaccine, the global economic outlook has become brighter. According to the new crown tracking project, the number of confirmed new crown cases in the United States is showing a downward trend, and the number of hospitalizations is also rapidly declining. Some companies have begun to reopen and expand production capacity, the manufacturing job market has improved, and the economy has gradually stabilized. Data show that the United States’ January new home sales increased by 4.3%, and the published value greatly exceeded expectations; the fourth quarter real GDP annualized quarterly rate revised value increased by 4.1%, reflecting the continued economic recovery from the earlier sharp decline; manufacturing orders After 10 consecutive months of shrinking, the annual rate of new orders in February this year turned negative to positive; the labor market is even more encouraging, with employment increasing by 1.8% to 54.4% for three consecutive months. Non-agricultural new jobs in February were 379,000, the unemployment rate fell to 6.2%. The speed of vaccination is accelerating and the United States has launched a new round of large-scale stimulus plan. Data show that the US economy is improving, which has pushed the dollar higher and suppressed the demand for safe-haven gold.

The outbreak of the new crown epidemic has brought a huge impact to the world economy, and countries have adopted expansionary monetary and fiscal policies; the Federal Reserve alone has invested trillions of dollars in the market to fund families and institutions affected by the epidemic, and large purchases of national debt have made the national debt market yield. In addition, the Fed’s interest rate cuts have led to a decline in the price of funds and promoted financial institutions to put funds into the market, thereby promoting economic recovery. Against the backdrop of large-scale stimulus plans and accelerating vaccination rates, the global economy is gradually recovering from the epidemic lockdown, and economic growth prospects are expected to boost real yields. Since the end of last year, the yield on the 10-year US Treasury has risen by more than 80 basis points. , The ascent process is relatively smooth. With the acceleration of the vaccination process and the improvement of economic conditions, there is still room for U.S. bond yields to rise; the agency predicts that U.S. bond yields may rise to 2.5% to 3% within a year or two. The optimism of the US economic growth has increased, pushing the yield of U.S. Treasury bonds to rise, boosting the U.S. dollar to rise to around 92.50. Under the dual suppression of the U.S. dollar and bonds, it is very difficult for gold to rise.

Global government fiscal stimulus measures and the expansion of vaccination coverage have raised prospects for economic growth and hopes for stronger fuel demand. Crude oil prices have been rising steadily after bottoming out in late April last year. This year, the price of oil once exceeded US$70/barrel. As major oil-producing countries restricted supply and accelerated vaccination, the economy continued to recover and fuel demand gradually increased. In March, U.S. President Biden Biden signed the $1.9 trillion stimulus bill into law, requiring all adults across the country to be vaccinated against the new crown before May 1. If the vaccination plan is successful, the peak driving season in the United States and Europe is expected to be received this summer Released, oil demand will continue to rise in the second half of the year. With the strong demand for terminal oil products and the economic recovery driving the rise in oil prices, the United States is a strong signal to reopen the theme. Oil is not only the fuel for most transportation needs, but also an important raw material for a wide range of consumer goods. The rise in oil prices will eventually be passed on to consumers. As a result, the overall price inflation fluctuates sharply, which has triggered the market’s speculation on the normalization of the Federal Reserve’s monetary policy is heating up.

With the acceleration of vaccination and the launch of a new round of large-scale stimulus plan by the United States, the global economic outlook has improved. In March, the Fed sharply raised its economic growth and inflation expectations. It is expected that the economy will grow by 6.5% this year, a sharp increase from the 4.2% forecast in December last year. With the strengthening of economic growth, the Fed raised its inflation forecast for the end of this year to 2.4% from the previous 1.8%. Oil prices and U.S. bonds have soared this year. Although gold prices continue to move forward, it is only a matter of time before inflation spreads to the consumer market. Oil prices and U.S. bonds represent inflation expectations. Recently, legendary investor Jim Rogers has warned investors that hot stock speculation and retail investment have surged, and the US stock market is heading towards a bubble, predicting that the two major safe-haven precious metals in London gold and silver will continue to prosper.