China's gold reserves report is coming soon
Europe and the United States are averse to the gold bull market
Why Wall Street doesn't dare to trend down on gold prices
2024-07-07 Weixin Investment Consulting and Research Center
(Text) Chief Analyst Yang Yijun
Source: Yang Yijun Gold & Financial Investment
On 7 July, China's central bank will release its foreign exchange and gold reserves for June. Whether China's central bank will increase its gold reserves in June will undoubtedly attract market attention.
Back at 16 o'clock Beijing time on June 7, when the central bank of China reported that the gold reserve increase pause button was pressed in May, the gold price plummeted by $25 in an instant. In the evening, it was further hit by the non-farm payrolls data in the United States (revised sharply downward on Friday), and gold prices fell more than $100 from the day's high. According to the appearance of daily and weekly patterns, gold prices seem to have a very broken downward inertia. On the next trading day, China's gold market will be closed during the Dragon Boat Festival, and the bulls in the gold market will undoubtedly be anxious.
However, the author has analyzed the driving logic of the gold market in the past two years, the source of energy, the nature of the distribution of funds in the gold market, and the solar terms. Judging with great certainty that gold prices will not trend downward, Wall Street has once again posed an excellent buying opportunity by taking advantage of the news and China's solar terms to deter the short. After that, gold prices will bottom out for up to two trading days. Although gold has broken through $2,300 on the day, $2,300 will not be effectively broken. The following is the original qualitative analysis of the current period about the huge suppression of gold prices:
| On Friday (June 7), the commodity market fell across the board, what does it have to do with the gap between China's Dragon Boat Festival holiday? If you further combine the news with the disk observation, you may feel that it is really related to the Chinese factor. Although the commodity market fell across the board on Friday, it was actually gold that fell the belligerent! At 16 o'clock Beijing time on Friday (June 7), China released its official reserve report. The data shows that China pressed the pause button in May after increasing its gold reserves for 18 consecutive months:  The PBOC's gold reserves were unchanged in May from 2,264.3348t in April. After the news came out, the price of gold flashed by $20, and then continued to fluctuate and fall, bottoming out near $2,330 before 19 points. After that, it will withstand the second wave of shocks corresponding to the better-than-expected non-farm payrolls data in the United States. At 4 p.m. on Friday, the People's Bank of China announced its gold reserves, and while gold prices corresponded to the flash crash, other commodity markets also fell accordingly, but the decline was much worse than that of gold. The main decline in the commodity market occurred after the release of the non-farm payrolls data. China's central bank pressed the pause button on gold reserves in May, is it really that bad for the gold market? Clearly, Wall Street amplified the bearish strength of the news. In fact, the PBOC's gold reserve increase tended to pause in April, as shown in the relationship between the PBOC's monthly net gold purchases and gold prices: The PBOC's gold reserves increased by just 1.86621t in April. And it is not difficult to see the relationship between the trend of gold prices in recent months and the net purchase of gold by the People's Bank of China, and the increase in gold reserves by the People's Bank of China is "not chasing up". Against the backdrop of another record gold price hit a new record high in May, China's central bank paused gold reserves, and there was nothing to make a fuss about. Information in the months after April 2023 suggests that the PBOC may amplify net purchases when gold prices pull back. Since November 2022, Wall Street hedge fund bears no longer dare to unscrupulously increase their positions in gold as they did in the second and third quarters of 2022 - the central bank's shorting, they are helpless! In the process of falling from the recent highs before the sharp fall in gold prices this week, hedge fund shorts closed their positions with large stop-losses, and did not dare to actively increase their positions at all. Even this week, hedge fund shorts continue to show a slight reduction in holdings. In any case, since November 2022, hedge fund bears have not dared to systematically short. At the same time, Wall Street undoubtedly dislikes gold challenging the dollar's credit supremacy. Therefore, in the gold bull market in the past year and a half, European and American hedge funds and gold ETFs are "not cold" to the gold bull market. They want to suppress the price of gold, but they are afraid of the power of the central bank to buy gold, and they do not dare to invest in shorts on a large scale. How can Wall Street hedge funds achieve their goal of suppressing gold prices without investing heavily in short power? Director "Kill more"! The author has always emphasized that this round of gold bull market has strong Chinese elements! The most obvious evidence is that the Shanghai AUTD gold price and the Shanghai gold futures price continue to be at a high premium relative to the international theoretical RMB gold. At present, the premium of gold futures is still about 10 yuan/gram, and the premium of AUTD gold price is about 6-8 yuan/gram. If Wall Street wants to suppress gold prices, it is better to exclude demand interference from China's gold market. There is undoubtedly a good time for the Chinese holiday trading gap. Before the Chinese holiday, the gold price was lured more, and after the holiday, investors who were lured to the price found that they encountered a trap of chasing the price and turned to stop loss, which will form a situation of more kills and more. This characteristic is reflected in the fact that the short-term decline in the gold price is large, but the duration is short-lived. Because fund bears do not dare to actively short gold on a large scale. After the end of the long stop loss, or even after the completion of the short inducement, the gold price will quickly bottom. The same is true for the gold market before and after the National Day holiday in 2023. However, due to the long holiday and the long closing time of the domestic gold market, there is enough time for hedge funds to toss around, and the gold market has more room to lure shorts and lasts longer. Towards the end of the long holiday, Hamas fired more than 5,000 missiles at Israel, and the fund bears lost their armor and fled for their lives. Therefore, the current geopolitical crisis environment will make funds feel afraid of blindly shorting gold. Therefore, the gold price suppression that began on Friday, the author believes that it should bottom out by Tuesday morning at the latest. It is not even ruled out that Monday will bottom out early. The possibility of bottoming out on Tuesday is because funds may finally take advantage of the "fear" of a stronger dollar caused by the Fed's interest rate meeting next week. If the inertia of gold prices on Monday continues to be suppressed on Tuesday, it cannot be ruled out that the People's Bank of China will start to act again. In a flash newsletter on Friday, I analyzed the "black swan" event in which the People's Bank of China (PBOC) pressed the pause button on gold reserves in May, which may be similar to the impact of the 2009 Dubai world financial storm. But ignoring the fact that the protagonist of the gold bull market before 2011 has always been Wall Street. And in this round of gold bull market, the protagonist may be Chinese demand. However, on Friday and next Monday, Chinese demand was not present. What are the fundamentals of the "Chinese influence" element in the gold market? Go to the dollar! Robert Kiyosaki, author of "Poor Dad, Rich Dad," has a theory that is not without reason: he argues that since the United States used the dollar as a political weapon. The BRICS countries are committed to building a digital currency system that uses gold as credit to replace the dollar, which could lead to the collapse of the dollar. Kiyosaki said in July 2023: "The BRICS currencies will be backed by gold, and 1 BRIC will be equivalent to 1 ounce of gold, which will cause the gold price to reach $3,000 to some extent." "A huge collapse is coming, and counterfeit money (dollars) will die," he stressed. Buy real gold, silver as soon as possible, and beware of the end of fiat currencies. "The dollar will die, trillions of dollars will pour back home, and inflation will rise dramatically. In May 2023, he frantically shouted that if the world economy collapses, gold and silver will rise sharply, of which gold will rise to $75,000 and silver will rise to $60,000. Of course, there is not much value in predicting specific data, but the author agrees with the development logic of the BRICS digital currency backed by gold as credit. Isn't that how the dollar achieved hegemony with the help of the Bretton Woods system in 1944! In 1971, Nixon announced the end of the Bretton Woods system, and the dollar officially ushered in a history of unfettered hegemony. On the whole, the author believes that the sharp drop in gold prices on Friday (June 7) is only a short-term phenomenon, and it will stabilize and recover next week. Another example is the weekly K-line chart of gold prices: |
In fact, there is no new low in gold prices on Monday, so when gold rebounds at $2,300 on Tuesday, we recommend not waiting and going long decisively. On Sunday, July 7, at 4 p.m. Beijing time, the People's Bank of China will release its report on foreign exchange and gold reserves for June. If the People's Bank of China still does not increase its gold reserves in June, it cannot be ruled out that the old Asian gold market will repeat itself on Monday, which will suppress gold prices to a certain extent, but it is impossible to "fry back to the pot" as on June 7; And if the People's Bank of China increases gold reserves again in June, especially if the increase in reserves is not weak, then there is a possibility of inertial shorting in the Asian gold market on Monday. Since the gold price has been fully sorted out in April, May and June, and the comparison between the gold price and the US dollar index K-line in June, the gold price has resisted the decline significantly, so it is more likely that the People's Bank of China will resume gold purchases again in June.