To The Moon

Affected by factors such as geopolitical conflicts and fluctuations in the Fed's interest rate cut expectations, the contradiction in risk appetite in the capital market has become increasingly prominent, and commodity prices have also entered a stage of high volatility.

Taking gold as an example, the price of gold has experienced a correction after experiencing the "crazy growth" . On April 22 local time, COMEX gold futures for June delivery fell 3.01%, the largest one-day drop since June 2022.

Two factors "suppress" precious metals

For a long time, geopolitics has been the first factor affecting the prices of gold and silver. With the gradual escalation of tensions in the Middle East, the market's demand for safe-haven assets such as gold and silver has also increased simultaneously. However, this situation has changed recently.

Not long ago, after Iran launched a missile and drone attack on Israel, Israel also launched a clear attack on Iran. In a sign that tensions in the Middle East may be coming to an end, Iranian Foreign Ministry spokesman Nasser Kanaani said "the Israeli attack is trivial and of no military value."

"The fact that the Iranian regime has downplayed Israel's response and said it will not retaliate has lowered some of the risk premium in the gold market," said Nicholas Frapel, global head of institutional markets at ABC Refinery in Sydney.

As the situation in the Middle East eases and the safe-haven premium clears, the market will also turn its attention to the economy. Changes in the market's expectations for the Fed's monetary policy have become the main factor affecting gold prices, and the cooling of the Fed's interest rate cut expectations is also an important factor that suppressed the rise in gold prices in the past two days.

After Federal Reserve Chairman Powell and several Fed officials made hawkish remarks that caused the market to lower interest rate cut expectations, on Tuesday local time, the lower-than-expected U.S. manufacturing PMI data for April released by S&P Global boosted interest rate cut expectations.

It is worth mentioning that there will be more data coming this week. On Thursday local time, the U.S. Department of Commerce will release first-quarter gross domestic product (GDP) data. On Friday, the U.S. will also release personal consumption expenditures (PCE) price index data for March. The release of the above-mentioned series of data will affect the Fed's judgment on monetary policy, which in turn will affect the price trends of the US dollar and gold.

Compared with gold, silver has a weaker safe-haven capital attribute, so changes in silver prices are more affected by market supply and demand. According to data released by the National Energy Administration, in March 2024, my country's newly installed photovoltaic capacity was 9.02 GW, a year-on-year decrease of 32%. Optimistic expectations.

Crude oil prices are expected to remain high

The easing of the conflict in the Middle East once caused WTI crude oil to fall to the $81 mark. However, oil prices also rose after the release of the US manufacturing PMI data, staged a reversal drama of first falling and then rising.

Specifically, on Tuesday local time, after the release of the U.S. manufacturing PMI data for April, the price of West Texas Intermediate crude oil (WTI) futures for June delivery on the New York Mercantile Exchange exceeded $83 per barrel, closing nearly 2%. According to statistics, U.S. WTI crude oil has risen by more than 16% this year.

Some analysts said that the slowdown in manufacturing activity will prompt the Federal Reserve to accelerate interest rate cuts this year, while lower borrowing costs usually stimulate the economy, which in turn stimulates demand for crude oil. As geopolitical risks cool down, crude oil has also returned to fundamentals.

From the perspective of the supply side, the supply of crude oil continues to remain tight. In the first quarter of 2024, OPEC's production cuts will begin to enter a substantive stage. In March of this year, OPEC crude oil production was 26.42 million barrels per day, a decrease of another 50,000 barrels per day from the previous month. It is worth noting that in March 2024, OPEC will extend its voluntary production cuts until the end of the second quarter of this year.

At the same time, the demand for crude oil picked up in the second quarter, the spring inspection of refineries ended and restarted one after another, and the increase in consumption capacity will boost the pace of crude oil inventory depletion.

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