Mass sale of gold is completed?
I am also tormented by this question, although evidence indicates that there should be no questions, especially now, when the administration of Byyden, which today takes office, significant additional budget expenditures are expected.
In people who know in the art of limiting inflation, the events of the last two weeks should have been, to put it mildly, cause anxiety. Gold, one of the safest assets during the majority of crises, both economic and political, lost 3.5% during the worst two weeks of the second half of November.
Whereas the defeat of a two-month ago was a completely understood reaction to passions, arising from the market after the appearance of a vaccine from COVID-19, the last massive sale looked suspicious from the very beginning, and its duration was questionable.
Wines for the weakness of gold positions over the past two weeks was held mainly on the yield of US bonds, namely, 10-pilots. When the last piece of legislative mosaic - the Senate - finally became democratic, which allowed the future President Bideno to implement his election program into life, not bringing gold income, surprisingly, began to lose 10-year revenue bonds.
In the markets, any action, despite how much it is, it is explained and justifies. It also happened with the yield on bonds.
Traders have expected higher rates due to the future economic stimulation, which can overlapping the economy, the labor market and, ultimately, wage growth. Suddenly, bonds with profitability, dollar and even bitcoin, but not gold - reliable insurance against inflation, received the main benefit from Bidenov trillions.
It doesn't matter that during the week, when the yield almost doubled, representatives of the Federal Reserve system categorically denied the possibility that the economy or wage growth may be quite persistent in order to provide a gradual decrease in stimulation or increase interest rates that are close to zero. Bond traders did not return the Ratches of the Fed, and Forex traders, the presentation of the low dollar rate as a result of the resale from the beginning of the year, were pleased to heal those who prefer gold.
During the writing of this article, the dollar partially lost his focus, and its main indicator regarding six major currencies, the USD index, falls the third day in a row to a weekly minimum of 90.31.
Gold futures on the New York Comex Stock Exchange, respectively, has achieved the highest per week of $ 1,850 per ounce. He fell before the November value of almost $ 1.804 only on Monday, when gold futures traded in a limited volume during the American holiday - Day Martin Luther King. Before the rest of the last two weeks, gold futures traded at $ 1.963 at the end of the first week of January, not reaching only $ 130 before the record price of $ 2,090 installed in August.
Sunil Kumar Dixit, Technical Analyst for Gold Gold Company SK Dixit Charting, located in Calcutta (India), says that in the next time, gold can try to break through a strategically important level of $ 1,890:
"While the price is kept at the level above $ 1828-1838, traders will strive to follow the 200-day simple moving average on a four-hour schedule, which remains $ 1.870, and a 50-day extraordinary moving average on the daily chart. If these levels are supported by purchase with a sufficient supply, wait for a level in 1890, which can become a turning point in the short term. The stochastic indicator Relative Strength Indicator is also positive in the daily and four-hour frames. "
So what unexpectedly changed in the dollar game against gold, which did not occur in the last six weeks? Essentially nothing. Only the same message about stimulating the economy in a large scale, this time from Janet Yellen, the Minister of Finance by Bayden. We will return to the former chapter of the federal reserve system and its emergency conviction, transmitted by her traders, which can be the key to restoring the economy, which is looking for participants in the bond market.
In the meantime, I will list the factors that will determine whether the gold will continue to move up to the plank at $ 1,900 and higher in the middle and short term, or will fall back to the role of passage inflation.
1. Budget deficit and inflation in the USA
Victor Dergunov from Albright Investment Group notes an important point: under the current yield of 1.1% on a 10-year bond, the amount of annual payments for the United States will be approximately $ 370 billion.Right now the US national debt is $ 28 trillion, and the total debt ratio to GNP is 146%.
The US federal budget deficit is approximately $ 4.5 trillion after the Trump administration last year added $ 3 trillion as anticoid measures to it.
If the yield on a 10-year bond will be 2%, in combination with $ 30 trillions of national debt, the amount of annual payments will be approximately $ 660 billion.
As DRGNOV notes, the annual deficit will only increase debt, and higher treasury rates will only increase annual expenses. He adds:
"I don't think that in the long run, the rates will become higher or even remain as high. It is unlikely because of the high national debt and debt burden on the US in general. Economy In this case, it is not inclined to demonstrate high growth in "normalized" rates.
These numbers (deficit) are noticeably overestimated, and we must understand that such a giant duty requires constant maintenance. "
2. Money Mass (M2)
M2 is a totality of money included in M1, plus semi-videos. M1 includes cash and money on check accounts, whereas for semi-visidants include money for savings accounts, investment in the cash market's securities, mutual investment funds and other urgent deposits. These funds are less liquid than M1 and are not suitable for payment, but they can easily turn into cash or money on check bills.
While the United States is at a relatively early stage of increasing money supply, the basis of M2 can still increase significantly by returning the country during the 2008/2009 crisis.
With the formulation of a monetary system based on the use of unsecured gold money, high inflation, definitely, not far off. The price of gold in the long run is in very close interaction with the increase in money supply. Despite the decline of the last two weeks and short-term fluctuations, there is a solid confidence - solid, like gold itself - that in the near future the price of yellow metal will increase.
3. Restoration of the economy, virus and development of the labor market
The chairman of the Federal Reserve System of Jay Powell last week made several confused statements. First, he denied any conversations about the restoration after a pandemic. But immediately stated that "there are many reasons to optimistically look at the US economy," and what we "will be very soon back to the old lifting economy."It caused problems for markets: how fast the economy will restore due to vaccines from COVID-19?
History with vaccines is to some extent the history of two cities: the mayor of New York Bill de Blazio says that in his city Vaccine will end next week, while the capital of Florida Tallahassess, on the orders of the governor of Rhône, distributes vaccines. In the meantime, according to the Center for the Control and Prevention of Diseases, the new British strain of Coronavirus, called "B.1.1.7." May spread already in March.
Despite the refund to the indicators of the third quarter, the US economy is in a deplorable state, in recent weeks the number of hospitalizations and deaths due to COVID-19 has reached new heights. The United States remains a country with the worst epidemiological situation: from January 2020, 23 million cases of disease and more than 400,000 deaths are registered.
On the labor front, the United States from March to April 2020 lost more than 21 million jobs in the most peak strict isolation caused by the coronavirus pandemic. In May, 2.5 million people returned to work and 4.8 million in June, and then the recovery rates began to slow down. In September, as in October, less than 700,000 jobs appeared. In November, another 245,000 was added, and in December 140,000 was lost - the first reduction from April.
This weak trend in the labor market continued in 2021, until January 9, 965,000 Americans filed an application for unemployment benefits, which is 23% more than last week and is the highest indicator for almost five months.
Powell admits that in the labor market "Clear lull", and that not only salaries will soon create the soil for inflation. He added:
"Another factor is a global decline in demand. In most advanced economies, in countries around the world, which began this crisis, interest rates are negative, and there are no opportunities for their growth. Such a situation will last for some time, and you know that the US economy is deeply integrated into the economy of the rest of the world. This will also have an impact. "
4. Factor Yellen
Jeff Haley, head of the Asia-Pacific Study Department in Oanda, noted at the morning meeting in this Wednesday that Wall Street returns to the buying stock stocks, selling the dollar and increasing the price of gold, after the reassuring assurances of Janet Yelevlen that the increase in debt is a matter Good, because it is done in the good purpose of the recovery of the economy after the century pandemic.
Yellen's statement before hearings in the Senate on Tuesday, on which she was approved for the post of Minister of Finance, possessed magnetism of Gordon Gordon's Magnetism, with the exception of the word "greed", of course.
Factor Yellen or Y-factor (where "y means" Yes! ") Can strongly affect the Bayden program to restore the economy over the next four, and even more years. The 74-year-old former chapter of the Federal Reserve system has many years of experience in politics and economics and respected, both both chambers of Congress and international financial leaders representing progressive and business interests.
Yellen is needed by Bidenu and for another reason: his plans for stimulation can meet resistance in the Senate simply because the majority in it represents the Democratic Party.
Stimulating measures are still part of the US budget, and without the absolute majority of 67 out of 100 votes, they will face a procedure called "coordination", which can be received by receiving at least 60 votes (now the Democrats and Republicans in the Senate are 50 votes, and Selected Vice President Camila Harris has an additional voice in case of drawing).
This need for coordination is concerned about the large package of stimulating measures may face difficulties in obtaining approval from the Senate, especially considering the republican "fiscal hawk" Mitch Macconnell returns as a minority leader in order to turn legislative activities in the Upper Congress Chamber in Aunt hell for democrats, as was at a time when he headed the majority.
And yet, the main democrat in the Senate Chak Sumer may, thanks to the bipartisan approach to achieve a number of stimulating medium-sized packages and perform the goals of the Baiden - with the help of yellen.
Heili from Oanda noted how on Tuesday Yellen pushed a Bidenovsky stimulating package of $ 1.9 trillion to the markets - the first of several expected from the new president:
"They wanted to hear more about stimulating, and Ms. Yelevlen provided them with 1.9 trillion causes for this."
What did the former head of the Fed say?
"Right now, when interest rates are very small, the best thing we can do is act in large. In the long run, I suppose, I suppose the costs will be paid, especially if we take care of people who have fought for their existence for a long time. "
Disclaimer: Bararan Krisnan cites the opinions of other analysts to submit a versatile market analysis. It is not the holder of the raw materials and securities reviewed in the article.
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