Price Trends of Spot Precious Metals
On August 7, 2019, domestic precious metal prices of spot gold and silver rose sharply again. Among them, the spot price of silver rose sharply, the average daily price rose by 1.99%, and the spot price of gold rose by 1.33%.
Data from business associations showed that the average spot price of domestic gold on the 7th day was 339.45 yuan/g, up 7.44% from 315.93 yuan/g on the 1st day, and 19.48% from 284.10 yuan/g at the beginning of the year (01.01). The spot price of silver in China is 4082.67 yuan/kg, which is 5.84% higher than the spot price of 3857.33 yuan/kg on the 1st day, and 12.85% higher than the spot price of silver at the beginning of the year (01.01), which is 3617.67 yuan/kg.
Gold, Silver and Precious Metals Increase Convergence Since June
Since June, the price of gold, silver and precious metals has increased by about 16 percentage points.
Precious metal gold spot rally started slightly earlier than silver spot. Spot gold prices bottomed in late April in 2019, while spot silver prices bottomed in late May. According to data from business associations, the lowest price of spot gold in a year (April 18) is 278.11 yuan/gram, with an annual amplitude of 22.06%, and the lowest price of spot silver in a year (May 29) is 3481.33 yuan/kg, with an annual amplitude of 17.27%.
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A Comparison of Price Trends of Precious Metals Gold and Silver
Increased expectations of global monetary easing
Last week, the Federal Reserve lowered interest rates for the first time in 10 years by 25 basis points from 2.5% to 2.25%, lowered the discount rate from 3% to 2.75%, and adjusted the excess reserve rate (IOER) from 2.35% to 2.10%. Market expectations for US economic policy to enter a counter-cyclically adjusted interest rate reduction cycle have risen, and it is reported that the possibility of a 50 basis point cut at the September meeting of the Federal Reserve (FED) is increasing due to increased downward pressure.
At the same time, monetary policy in developed economies such as the United States and Europe has shifted to easing. At present, with the global economy resonating downward, many central banks are considering interest rate cuts. After Australia, India, Russia, South Korea and other countries announced interest rate cuts, the ECB recently expressed a strong willingness to ease, 7 New Zealand Federal Reserve unexpectedly cut interest rates by 50 basis points.
Analysts believe that central banks will make insurable interest rate cuts and expect to see more cuts. The external uncertainty caused by the trade situation has prompted all central banks to consider easing policies.
With expectations of global monetary easing intensifying, interest rate cuts by central banks are in itself a good thing for precious metals with hedging and hedging functions. The allocation value of precious metals to maintain and increase value and resist inflation has been highlighted.
Increased uncertainty in the global economic and trade situation
On the trade side, US President Trump said on August 1 that the US would impose a 10% tariff on 300 billion US dollars of imports from China from September 1 this year. The devil’s technique of extreme pressure by the US side has added enormous uncertainties to the ongoing Sino-US trade negotiations.
A press release released by the Ministry of Commerce early Tuesday (August 6) showed that Chinese companies suspended new U.S. agricultural purchases. The State Council Tariff and Tax Commission does not exclude tariffs on imports of new US agricultural products after August 3. Chinese enterprises have suspended purchasing American agricultural products.
At the financial end, on Monday (August 5), the U.S. Treasury Department listed China as a “currency manipulator”. The People’s Bank of China issued a statement Tuesday saying that China deeply regrets this. This label does not conform to the so-called “exchange rate manipulator” quantitative standard formulated by the U.S. Treasury. It is a wayward unilateralism and protectionist act, which seriously undermines international rules and will have a significant impact on the global economy and finance.
The global economic and trade situation is not optimistic, the market demand for hedging has surged, and the price of precious metals has risen.
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Bullish sentiment in the market
BlackRock’s iShares Gold Trust gold holdings have climbed to record highs, and hedge funds have increased their bullish bets on gold. According to relevant data, the world’s largest gold ETF – SPDR Gold Trust position increased by 1.76 tons, an increase of 0.21%, compared with the previous day, and the current position is 836.92 tons. COMEX gold futures rose above $1,500 per ounce in the 7th session, spot gold topped $1,490 per ounce, up 1.13 per cent in the day.
The price of precious metals in domestic futures market is rising rapidly.
In Asian market on Monday (August 5), the main contract of gold on Shanghai Futures Exchange (Gold 1912) rose and stopped in the afternoon. The price was 334.00 yuan/g, up 9.55 yuan/g, up 3.99% per day. The highest price was 334.00 yuan/g, the lowest price was 323.40 yuan/g, and the settlement price was 329.20 yuan/g. On Wednesday (August 7), the price was 324.45 yuan/g. In Shanghai, the main gold contract (gold 1912) of Shanghai Futures Exchange closed at 341.80 yuan/g, opening at 336.00 yuan/g, up 5.8 yuan/g, a daily increase of 1.41%, a maximum price of 343.30 yuan/g, a minimum price of 335.55 yuan/g and a settlement price of 339.70 yuan/g.
On Monday (August 5), the main contract of silver on Shanghai Futures Exchange (Silver 1912) closed at 4067 yuan/kg, up 170 yuan/kg at 3897 yuan/kg, a daily increase of 4.10%, the highest price was 4088 yuan/kg, the lowest price was 3893 yuan/kg, and the settlement price was 3995 yuan/kg; on Wednesday (August 7) in Asia, Shanghai Futures Exchange, the settlement price was 3995 yuan/kg. The main bank contract (Silver 1912) receives 4124 yuan/kg, starting at 4038 yuan/kg, up 86 yuan/kg, with a daily increase of 1.70%. The highest price is 4154 yuan/kg, the lowest price is 4043 yuan/kg, and the settlement price is 411 yuan/kg.
Current Trend Chart of Precious Metals Period
How far can the precious metal market go?
Influenced by unilateralism and trade protectionism measures, tariff expectations and listing China as an “exchange rate manipulator”, central banks’expectations of interest rate reduction have been strengthened. At present, there are many uncertain risk events, hedging sentiment in the market is high, and the advantages of precious metals’ hedging, preserving and increasing value, and anti-inflation have been favored by the market. Bank of America Merrill Lynch boldly predicts that gold prices will rise to $2000 per ounce by the second quarter of 2020.
According to historical data of business associations, the precious metal gold commodity index is 90.18, up 1.18 points from yesterday, down 13.36% from the peak of 104.09 points in the cycle (2011-09-06), and up 56.35% from the lowest point of 57.68 on August 02, 2015. (Note: Cycle refers to 2011-09-01 to date); the Silver Commodity Index is 46.56, up 0.91 points from yesterday, down 54.69% from its peak of 102.76 points (2011-09-06), up 30.16% from its lowest point of 35.77 on Dec. 03, 2015. (Note: Period refers to 2011-09-01 to date). Business analysts believe that the price of precious metals has tended to a relatively high level in the history of gold, but there is still room for a larger rise; silver has a stronger industrial attribute, and the correlation with non-ferrous plate is greater than gold. At present, the relatively low level, precious metals gold natural currency attributes lead to an obvious upward phenomenon. The future market is waiting to see the change of risk aversion enthusiasm, and it is expected that strong operation will be the main trend in the near future.
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