Since the beginning of this year, the price of gold has shown a continuous upward trend.
Chinese consumers who have always been enthusiastic about gold consumption started the "gold buying fever" again. However, during the Mid-Autumn National Day holiday in China, the price of gold dropped continuously, and on October 3, it even dropped to 1814.8 USD/oz, setting a new low in nearly seven months.
However, with the escalation of the Palestinian-Israeli conflict, the price of gold stabilized and rose again. As of noon on October 10, Beijing time, the spot gold price was reported at US $1,853.20 per ounce, up 1.1%, reaching a new high since September 29. The roller coaster-like fluctuations in just a few days have also touched investors' nerves: Where will the gold future go? What impact will the chaotic situation in the Middle East have on gold?
There is still a haze in China's economy
The haze caused by the three-year epidemic in China has not completely dissipated, and the economic recovery still needs a process. As the world's largest gold consumer and the second largest gold producer, China's economic situation has an important impact on the gold market.
The less than expected consumption expenditure and travel data of last week's long holiday also indicate that Chinese residents are cautious about the future economic prospects and may reduce their purchases of luxury goods such as gold. But a slowdown in China could also raise concerns about global economic growth, leading investors to seek safe-haven assets and driving gold prices higher. On the whole, the impact of China's economic haze on the gold market is two-way, but it may be negative on the whole, because the impact of Chinese consumer demand on gold price may be greater than the global safe-haven demand.
Fed rate hike is expected to fall
The Federal Reserve is one of the most important central banks in the world, and its monetary policy has direct and indirect influence on the gold market.
The direct impact is achieved through the US dollar exchange rate and the US interest rate level. The dollar exchange rate is the main negative factor for the price of gold, because gold is an international commodity denominated in dollars. The American interest rate level affects the opportunity cost of gold, that is, the interest income abandoned by holding gold.
The indirect impact is realized through the economic situation and inflation expectations in the United States. The U.S. economy reflects the momentum of global growth, while inflation expectations reflect investors' concerns about currency depreciation.
Recently, Fed officials said that the need for rate hike is declining, which means that the Fed may postpone the timetable for tightening monetary policy. This is good news for the gold market, because it means that the exchange rate of the US dollar may weaken, the interest rate level in the United States may remain low, and inflation expectations in the United States may rise, thus raising the price of gold.
However, the decline in the need for rate hike also reflects the slowdown in economic growth and inflationary pressure in the United States, which is bad news for the gold market, because it means that the momentum of global economic recovery is weakened, and the demand for gold as industrial raw materials and consumer goods is reduced, thus depressing the price of gold.
Therefore, it is necessary to comprehensively consider the direction and degree of various factors. Judging from the current situation, Fed officials said that the positive effect of the decline in the necessity of rate hike on the gold market may outweigh the negative effect, so the international gold price may continue to rise. However, this trend is unstable and unsustainable, because the change of any factor may lead to fluctuations in the gold market.
The sudden Palestinian-Israeli conflict
The Palestinian-Israeli conflict is one of the longest and most complex geopolitical issues in the Middle East, and its development has an important impact on global geopolitical stability and energy security. Since the 7th, a new round of military conflict broke out between Palestine and Israel, resulting in nearly 2,000 deaths. The conflict is still going on, and multi-party mediation has not made substantial progress. This situation may arouse the market's concern about the deterioration of the situation in the Middle East, the interruption of crude oil supply and the escalation of terrorist activities, thus stimulating investors to seek safe-haven assets and pushing up the price of gold.
In fact, the price of gold jumped to $1,851/oz at the opening on Monday, October 9, contrary to the trend of continuous decline since September 25. Haberkorn, senior market strategist at RJO Futures, believes that it remains to be seen how the situation in the Middle East will develop. If the situation escalates further, the price of gold may move towards $1,900.
Of course,The escalation of the Palestinian-Israeli conflict also has risk factors for the gold market, because it may lead to the rise of the value of the US dollar, the correction of the yield of US bonds, the decline of US stock futures, etc. If these factors put pressure on the gold price, they may offset the support brought by some safe-haven demand.
How to deal with many uncertainties?
Under the current environment, the global economy and politics are facing many uncertainties and challenges, which may have an impact on the gold market and lead to fluctuations and risks in the gold price. In response to this situation, investors can use CME group's Micro Gold Futures (MGC) to hedge risks.
Micro Gold Futures (MGC) is a metal futures product with 10 troy ounces as the contract unit. Compared with 100 ounce gold futures (GC), the trading scale and margin requirements are lower. Micro gold futures can allow investors to participate in the gold market with less capital and risk, and achieve the purpose of hedging, speculation or arbitrage. In the second quarter of this year, the average daily trading volume of micro gold futures contracts was close to 80,000, up about 70% year-on-year.
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