Fed rate cut expectations rise, gold back to the upward channel?

Interface News

2024-05-16 15:04Posted on the official account of Beijing Jiemian News

Image source: Tianhong Fund

Today (May 16, 2024), spot gold opened at $2386.03 / ounce, the highest rose to $2396.49 / ounce, and the lowest touched $2385.95 / ounce, spot gold resumed its upward trend, and bulls tried to move towards $2400.

On the news side, yesterday evening, the US April CPI data was released, and the monthly rate of core CPI in April fell to 0.3% as scheduled, a new low since December last year. The U.S. core CPI monthly rate cooled for the first time in six months, and the market expects the Fed to cut interest rates faster in 2024, and bets that the Fed will cut interest rates in September and December have increased.

In addition, the recent regional conflict has intensified, Israel's new evacuation order for Rafah and the continuous attack in the past two days, the market analysis believes that it may be a precursor to a full-scale offensive, and the regional situation has not improved, which makes the market worry aggravated and the demand for risk control increases.

From a fundamental point of view, the United States April PMI, labor market and other economic data cooled down across the board, CPI data fell as scheduled, the Federal Reserve interest rate cut expectations further strengthened, Tianhong fund manager still maintains the Fed's judgment that the Fed has a high probability of cutting interest rates during the year, according to historical data, gold may have a good performance before the rate cut, but after the rate cut lands, gold may have a short-term adjustment, to normalize the interest rate cut, with the rise in inflation, the real interest rate falls, gold is expected to appear in the main rising wave market.

However, the fund manager here wants to emphasize that it is not recommended that you pay too much attention to short-term data, according to experience, the impact of short-term ups and downs on investment income reference value is not large, one is that there are many factors affecting short-term ups and downs, it is difficult to have accurate judgments, and second, it is time-consuming and laborious, and the energy invested and the returns obtained may not be equal. Therefore, for most investors, it is more appropriate to understand the long-term investment logic of gold and allocate gold from a longer-term perspective.

In the long run, it mainly depends on inflation and fiat credit. First of all, look at inflation, in fact, the global inflation in the past 20 years is not serious, but after 18 years, the Sino-US trade friction has intensified, and the United States shouted that the manufacturing industry should return, so in this context, the original domestic manufacturing industry should be transferred to other countries, and other countries are not like the mainland with infrastructure, labor, technology and other cost advantages, at least in a short period of time, then there will be insufficient supply of goods and the problem of rising costs, thereby raising consumer prices and global inflation, which is undoubtedly good for gold; In addition, there are several key points of fiat currency credit: 1) The United States uses the dollar as a weapon to impose relevant restrictions on other countries, including Russia, Iran, North Korea and other countries; 2) The size of the U.S. debt, according to the U.S. Treasury Department, the scale of U.S. debt continues to rise, and has exceeded the $34 trillion mark at the beginning of this year, and the accumulation of debt is bound to affect the credit of the U.S. dollar. Based on these two points, we have doubts and concerns about the credit of the US dollar, in this context, we see that central banks continue to increase their holdings of gold reserves, on the whole, European and American countries due to historical reasons, gold reserves are relatively high, but non-European and American countries gold in the total reserves of the whole country is quite low, typical countries have the mainland, Singapore, Japan, etc., the proportion of gold reserves is only in single digits, and the world average is about 15%, so for these countries, the future is likely to continue to reserve gold, It may also further stimulate the rise in gold prices.

Therefore, for gold can return to the rally, Tianhong fund manager still maintains the original judgment, that gold in 2-3 years are worthy of allocation of high-quality assets, the current gold from the high point in mid-to-late April fall, the recent rebound trend, may be a better time to get on the car, related products Tianhong Shanghai Gold ETF Feeder Fund (A: 014661; C: 014662), which closely tracks the price of gold, with a minimum purchase of 1 yuan, is a convenient choice for investing in gold.

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