Price Trends of Spot Precious Metals
On August 26, 2019, the domestic precious metal price of spot gold and silver rose sharply again, opening the second sharp rise in August. Among them, the average daily increase of silver spot price was 4.70%, and the spot price of gold rose 3.54%.
Data from business associations showed that the average spot price of gold in China was 355.65 yuan/g on the 26th, up 12.57% from 315.93 yuan/g on the 1st day, and 25.18% from 284.10 yuan/g at the beginning of the year (01.01). The spot price of silver in China is 4347.33 yuan/kg, which is 12.70% higher than the spot price of 3857.33 yuan/kg on the 1st day. The spot price of silver at the beginning of the year (01.01) is 3617.67 yuan/kg, which is 20.17%.
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 the data of business associations, the lowest price of spot gold in a year (April 18) is 278.11 yuan/g, with an annual amplitude of 27.29%; the lowest price of spot silver in a year (May 29) is 3481.33 yuan/kg, with an annual amplitude of 23.94% (all based on the market average price on January 1 of the year).
In the first half of July, early August, and today’s sharp rise of 4-5 points, three waves of rapid and steep market, directly pushing up the price of silver. In mid-July, due to the influence of the ratio of gold to silver, the expectation of market replenishment was strengthened, and silver was praised. The two waves of “sudden” since August were mainly due to the obvious influence of “Sino-US trade policy” on both gold and silver.
A Comparison of Price Trends of Precious Metals Gold and Silver
At present, the spot price of precious metals is at the historical point in the past eight years.
On August 26, the gold commodity index was 94.49, up 3.23 points from yesterday, down 9.22% from 104.09 points in the cycle (2011-09-06) and 63.82% from 57.68 points on August 02, 2015. (Note: Period refers to 2011-09-01 to date)
On August 26, the silver commodity index was 49.58, up 2.22 points from yesterday, down 51.75% from the cyclical peak of 102.76 points (2011-09-06), and up 38.61% from the lowest point of 35.77 on December 03, 2015. (Note: Period refers to 2011-09-01 to date)
“Risk aversion” dominated by Sino-US trade policy
The US side:
1. US President Trump said on August 1 that the US will impose a 10% tariff on 300 billion US dollars imported 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.
2. On August 5, the U.S. Treasury 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.
3. On the evening of August 23, President Trump announced on Twitter that from October 1, the tariff on $250 billion of Chinese goods would be raised from 25% to 30%, and that the 10% tariff on $300 billion of Chinese goods would be raised to 15% from September 1.
1. A press release released by the Ministry of Commerce in the early morning of August 6 shows that Chinese enterprises have suspended new purchases of American agricultural products. 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.
Towards September 1, the United States imposed a 10% tariff on China’s $300 billion commodities, forcing China to take legitimate counter-measures. On the afternoon of August 23, China announced a tariff increase of 5% to 10% on US $75 billion commodities, which will be implemented in two batches starting from September 1 and December 15. In accordance with the Customs Law of the People’s Republic of China, the Foreign Trade Law of the People’s Republic of China, the Import and Export Tariff Regulations of the People’s Republic of China and other basic principles of international law, and with the approval of the State Council, the Customs and Tariff Commission of the State Council has decided to impose on 5078 items of tax originating in the United States, about $75 billion of goods The 10% and 5% tariffs will be levied in two batches starting at 12:01 on September 1 and 12:01 on December 15, 2019.
At present, the news of Sino-US trade war basically dominates the market’s “risk aversion sentiment”. Under the globally unoptimistic economic and trade situation, the allocation value of precious metals’value preservation and appreciation and anti-inflation hedging is highlighted. The price of precious metals is sensitive in both futures market and spot market after “weekend mood brewing”.
Rising expectations of monetary easing and surging demand for gold reserves by central banks
As the global recession continues, manufacturing inflation data continues to slump, global bond markets have also issued alarm signals, and central banks’easing stance has been further strengthened. The Federal Reserve’s “first drop” in 10 years triggered expectations of the start of the interest rate reduction cycle; after Australia, India, Russia, South Korea and other countries announced interest rate cuts, the ECB also expressed strong easing willingness in early August, with the New Zealand Federal Reserve unexpectedly cutting interest rates by 50 basis points on the 7th.
Meanwhile, the appetite of central banks for precious metals has risen sharply. The Central Bank of Russia has performed particularly well. According to the latest data released by the Central Bank of Russia, Russia has purchased 3.4 million ounces or 106 tons of gold this year, adding a large amount of gold every month. Gold currently accounts for 19.6% of Russia’s total reserves. According to the latest official data, the Russian Central Bank purchased 300,000 ounces or 9 tons of gold in July, 600,000 ounces in June, 200,000 ounces in May, 550,000 ounces in April, 600,000 ounces in March, 1 million ounces in February and 200,000 ounces in January. As of August 1, gold reserves totaled 71.3 million ounces or 2,218 tons, compared with 71 million ounces or 2,208 tons on July 1, with an increase of 1.6% or $101.9 billion in total value.
According to data released by the World Gold Association in August, as of June 2019, the world’s official gold reserves totaled 34,076.88 tons. Among them, the euro area (including the European Central Bank) totals 10,776.9 tons, accounting for 55.8% of its total foreign exchange reserves, and the central bank sales agreement (CBGA) signatories totals 10,901.5 tons, accounting for 52.7% of its total foreign exchange reserves.
In the first half of 2019, global central banks’net purchases amounted to 374.1 tons, up 57% year-on-year, the highest level since central banks became net buyers in 2010 (in annual terms).
World’s Top Fifteen Official Gold Reserve Data Sheets (as of June 2019)
Domestic gold reserves have also increased. According to data released by the Bureau of Investigation and Statistics of the People’s Bank of China, by the end of July, China’s gold reserves had increased by 9.95 tons to 1,936.5 tons, realizing an eight-month increase in gold reserves since December 2018.
How far can the precious metal market go?
Although the US side is preemptive and aggressive, China has always maintained relative restraint and rationality. It is reported that on the morning of August 26, Vice Premier Liu He of the State Council expressed his firm opposition to the escalation of the trade war when he attended the opening ceremony of the 2019 Chongqing Intelligent Industry Expo (China International Intelligent Industry Expo). Liu He said: “We are willing to resolve the problem through consultation and cooperation in a calm manner and resolutely oppose the escalation of the trade war. We believe that the escalation of trade war is not conducive to China, the United States and the interests of the people of the world.”
Generally speaking, unilateralism and trade protectionism are intensifying, and there are still more uncertain risks in Sino-US trade. In addition, the expectations of interest rate cuts of central banks have increased, the market hedging sentiment has risen, and the advantages of precious metal hedging, value preservation and appreciation, and anti-inflation have been favored by the market. 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.