Summary of Views
- Spot gold prices in London fell and then rose last week, climbing as high as $2065.5/oz in mid-week, and then pushed prices down by strong jobs data, with the dollar index up 0.47% to 103.97. Last week's series of complex events, such as the decline in US regional bank stocks and the January non-farm payrolls boom, are reminiscent of the SVB banking crisis in February and March last year and the three-fold expected non-farm payrolls. However, as our report last week suggests, even the occurrence of a "blockbuster" event will not change the outcome of the range-bound price volatility after the convergence of the annual rate cuts implied by interest rate futures is gradually in place. This logic still holds true in the near future, and the short-term dip layout can wait for more positive results.
- The highlight of January's non-farm payrolls data is also the increase in labor productivity. In addition to nearly double the expected 353,000 new nonfarm payrolls (185,000 expected) and revised upwards to 333,000 in the previous month, the unemployment rate of 3.7% fell short of expectations of 3.8%, and the average hourly earnings growth rate of 0.6% month-on-month hit a new high since March '22, the US nonfarm labor productivity growth rate in the fourth quarter was 3.2% quarter-on-quarter and an annualized growth rate of 2.7%, rebounding for four consecutive quarters and higher than the pre-pandemic average of less than 2%. This means that even if the non-farm payrolls data is strong, accompanied by a rise in labor productivity, there is no need to worry that inflation will stagnate at an unacceptable level.
Overseas major interest rates
Strong non-farm payrolls data undermined expectations of short-term rate cuts
- Last week, the interest rate hike expectation curve shifted upwards as a whole, and the rate cut for the whole of 2024 converged to 126bps, and the market did not fully price in a rate cut from May, and the month of the first rate cut was moved back to June. Last week's most immediate undermining of expectations for a near-term rate cut was the strong non-farm payrolls data. The number of new non-farm jobs in January was 353,000, with an expectation of 185,000, the highest in a year, and the previous value was revised upward to 333,000, which means that the job market in the second half of last year was hotter than expected, the unemployment rate in January was 3.7%, lower than the expected 3.8%, and the average hourly earnings in January increased by 0.6% month-on-month, with an expectation of 0.3%, the highest since March 22. In addition, the January FOMC meeting was held, at which Powell stated that it was unlikely to cut interest rates in March, and the overall statement was neutral, focusing on the balance between the uncertainty of the economic outlook and the risk of rising inflation. The event that caused the market to trade the Fed's rate cut ahead of the FOMC meeting was a dividend cut by US regional bank New York Community Bank in response to non-performing loans, reminiscent of the SVB risk event in March last year.
Source: Wind, Zijin Tianfeng Futures Research Institute
Term premiums fell by 14bps in a single week
- Last week, the impact of strong economic data weakened expectations of near-end interest rate cuts, with short-end interest rates rising more than long-end, with 2Y UST up 1.5bps to 4.372% and 10Y UST down 11.5bps to 4.024%, flattening the yield curve and term premium converging to -33bps. Last week, the Ministry of Finance lowered the net borrowing scale for January ~ March from 816 billion US dollars to 760 billion US dollars, so that long-end treasury bonds led the rise, and the quarterly bond issuance scale announced at the second quarter refinancing meeting held on Wednesday was fully in line with the market's previous expectations, and the term arrangement was not readjusted, thereby pushing the term premium downward.
Source: Wind, Zijin Tianfeng Futures Research
The Fed will discuss in depth the issue of slowing its balance sheet reduction at the March FOMC meeting
- On Friday, the use of ONRRP was $513.4 billion, down $57.4 billion from the previous week, and reserves edged down to $3.41 trillion.
- At the January FOMC meeting, Powell announced that he would begin an in-depth discussion of the balance sheet at the March FOMC meeting.
Source: Wind, Zijin Tianfeng Futures Research Institute
2y和10y UST持仓情绪偏空
- As of 1.30, the U.S. Treasury interest rate position was bearish, with the 2-year UST futures non-commercial net position increasing by 38,116 lots to 1307001 lots, indicating hesitation on the expectation of a near-term interest rate cut, and the 10-year UST futures non-commercial net position short increased to 859015 lots, pointing to strong economic data in the United States.
- Investor sentiment as net long JPM Treasury bonds picked up slightly last week.
Source: Wind, Zijin Tianfeng Futures Research Institute
U.S. real interest rates
- 5年期和10年期TIPS收益率分化,5年期TIPS收益率于周五收于1.8%,较前周上行2bp;10年期TIPS收益率于周五收于1.82%,较前周下行3bps。
Source: Wind, Zijin Tianfeng Futures Research Institute
The U.S. Dollar Index and Liquidity
The main components of the U.S. dollar index
- Last week, the U.S. dollar index and gold prices moved in the same direction, with gold up 1.06% and the U.S. dollar index up 0.47%, with a rolling correlation between the two.
Source: Wind, Zijin Tianfeng Futures Research Institute
Positions in the U.S. dollar index
- As of 1.30, the total position of the US dollar index increased, the non-commercial long position increased by 712 contracts month-on-month to 16,800 contracts, and the non-commercial short position increased by 1,987 contracts month-on-month to 16,900 contracts, dominated by short power, and in terms of the proportion of positions, the proportion of non-commercial long positions was 67%, unchanged from last week, and the proportion of short positions was 66%, an increase from last week.
Source: Wind, Zijin Tianfeng Futures Research Institute
Offshore USD liquidity
- Last week, the JPY 3-month Basis Swap and the EUR 3-month Basis Swap fell month-on-month, and the offshore USD liquidity margin was tight.
Source: Bloomberg, Zijin Tianfeng Futures Research Institute
A high-frequency indicator of inflation
Inflation expectations
- The copper-gold ratio fell to 4.16 last week, with copper prices falling and gold prices rising, indicating a marginal increase in global aggregate demand momentum.
Source: Wind, Zijin Tianfeng Futures Research Institute
Price comparison and volatility
Gold price comparison
- The gold-silver ratio fluctuated higher, mainly because gold rose sharply last week, and the gold-copper ratio rose slightly, mainly because gold rose and copper fell last week. The gold-oil ratio was higher month-on-month, mainly due to higher gold prices and lower oil prices.
Source: Wind, Zijin Tianfeng Futures Research Institute
Gold correlates with major assets
- From a rolling correlation perspective, gold has a lower correlation with crude oil and copper, and gold has a higher correlation with the U.S. dollar index.
Source: Wind, Zijin Tianfeng Futures Research Institute
Spreads and comparisons
- Last week, the spread between the inside and outside of gold narrowed slightly, and the spread between the inside and outside of silver widened slightly, which is related to the seasonal demand for gold jewelry near the Spring Festival.
Source: Wind, Zijin Tianfeng Futures Research Institute
Inventory, holdings
Gold and silver stocks
- In terms of inventory, COMEX gold inventories were 19.072 million ounces last week, down 526,300 ounces month-on-month, COMEX silver inventories decreased to 274.937 million ounces, down 1.2804 million ounces month-on-month, SHFE gold inventories were about 3.1 tons last week, flat month-on-month, and SHFE silver inventories increased to 1001.25 tons, up 87.09 tonnes month-on-month.
Source: Wind, Zijin Tianfeng Futures Research Institute
Gold and silver ETF holdings
- SPDR gold-backed ETF holdings decreased by 4.3t q-o-q to 851.72t, and the current holdings are around the 10-year median;
- SLV Silver ETF holdings decreased by 293.33 tonnes from the previous month to 13,534.52 tonnes and are currently at a median high level.
Source: Wind, Zijin Tianfeng Futures Research Institute
COMEX黄金持仓（滞后一周）
- As of 1.30, the total gold position of COMEX decreased by 35,544 lots to 430,000 lots, of which the non-commercial long position decreased by 21,878 lots to 219,000 lots, and the short position decreased by 195 lots to 714,000 lots, indicating that the short power of gold allocation is increasing;
- In terms of the proportion of open interest, the proportion of non-commercial long positions decreased to around 51%, and the proportion of non-commercial short positions increased to around 17%.
Source: Wind, Zijin Tianfeng Futures Research Institute
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