Golden Weekly Review: avoid danger and cool down! Gold prices lost their biggest weekly decline in seven months

London (Oct 12)  Spot gold fell more than 1% this week, its biggest weekly decline since March, as concerns about international trade disputes and Brexit eased and interest in risky assets revived.

The two big trading economies appear to be at least close to reaching some trade deals, boosting investor sentiment for riskier assets, which is bad for safe havens, including gold. In addition, the UK and the EU are likely to make some progress on Brexit, which will not boost European markets, all of which are bad for the gold market.

Risk aversion has been the main driver of gold prices in the past few months, and despite a cooling this week, a number of institutions still expect bullish gold in the medium to long term, based on global debt and interest rate cuts by central banks around the world.

By the end of the week, spot gold had fallen 1500 to $1489.01 an ounce, down 1.04 per cent.

The consultations between China and the United States have yielded positive results, and remain calm and continue to move forward.

The new round of high-level economic and trade consultations between China and the United States ended in Washington on Friday. U.S. president Donald Trump met with Liu he, member of the political Bureau of the CPC Central Committee, vice premier of the State Council and Chinese leader of the China-US Comprehensive Economic Dialogue, who is holding a new round of high-level consultations on economy and trade between China and the United States in the Oval Office of the White House.

The first information disclosed by the two sides showed that some progress had been made in the consultations. The two sides agreed to continue to work towards each other and work together in the direction of reaching a final agreement. Before the economic and trade consultations were held, public opinion was not very optimistic about the outcome of the consultations.

The new pressure on China by the United States before the start of the negotiations has particularly triggered a wave of pessimistic analysis in the international community. However, the outcome of the negotiations was clearly better than expected. This is the result of the logic of the general situation.

Jim Wyckoff, senior analyst at Kitco Metals, said the market was optimistic about the outcome of the trade talks, boosting investor sentiment for riskier assets, which was bad for safe havens, including gold. In addition, the UK and the EU are likely to make some progress on Brexit without a hard Brexit, boosting European markets, all of which are bad for gold prices.

However, the optimistic expectations of trade negotiations have been digested ahead of time, in late trading in New York on Friday, the relevant trade news, gold prices fell slightly, quickly rebounded, as of the end of the day, spot gold rebounded nearly $15.

Gold ETF positions close to all-time highs

Earlier, it was reported that the explosion of the Iranian tanker zha, stimulated the rise in oil prices, while gold also rose because of heightened risk aversion; Iran's national oil company said two missiles hit the tanker SINOPA, causing the explosion of zha. The bomb that attacked the Iranian tanker may have come from Saudi Arabia.

The day after Turkey launched a military offensive against Kurdish militants in Syria, Syrian Kurdish forces announced on Thursday that they had repelled a new offensive by Turkish troops in northeastern Syria along the border between the two countries. There is no sign of a cooling geo-situation for a short time, which will support gold prices in a short period of time.

In addition, expectations of an orderly Brexit are heating up, with JPMorgan Chase's latest forecast showing that the chances of Britain agreeing to leave the EU on time on October 31 have soared from 5 per cent to 50 per cent, making it the most likely prospect. At the end of the month, the probability of leaving the EU without an agreement halved to 5 per cent from the original 10 per cent.

According to the WGC market analysis team, global uncertainty remains high and there is little sign of a decline in the near future. Against this backdrop, central banks still believe they should increase their holdings of gold in their reserve portfolios. Gold ETF increased its position on Thursday, close to the record 82.7 million ounces set in 2012.

Central banks cut interest rates to create a very favourable environment for gold

Western Pacific Bank (Westpac) said risk aversion and global monetary policy easing would continue to push up gold prices until around mid-2020, which is expected to rise from about $1510 by the end of the year to $1520 in June next year.

Risk aversion has been the main driver of gold's rise over the past few months and will continue to do so in the coming year. The interest rate cuts by central banks have created a very favourable environment for gold.

In September, the Federal Reserve cut interest rates, the European Central Bank cut interest rates, and restarted quantitative easing. On October 1st the RBA followed suit, cutting its cash rate by 25 basis points to 0.75 per cent, a record low, for the third time this year. On Aug. 7, the Fed cut interest rates by 50 basis points to 1.0%. It is also likely to cut interest rates four more times before suspending interest rate hikes.

Zhang Yuzhen (Joyce Chang), head of global research at JPMorgan Chase, points out that international gold prices have skyrocketed this year, hitting a six-year high. But the recent rally in gold prices has been bumpy, with risk aversion waning and spot gold hovering around $1500.

However, as central banks around the world resume the easing cycle, there are still many institutions bullish on the medium-and long-term trend of gold. We note an increase in demand for gold, which has experienced a lot of 'supercycles' and is expected to rise to $1720 next year.

Institutions raise year-end gold price expectations

Peter Hug, head of global trading at Kitco Metals, said the fundamentals driving gold prices remained, but that momentum would not continue if gold prices were not adjusted. If it is based on global debt, it is right to be bullish on gold, which should be above $1500 an ounce.

The bank believes that the day when gold prices break above their 2011 highs will eventually come, and if the price of gold "skyrockets" to more than $2000 an ounce, it will mean serious problems in other markets, such as equities or bonds.

Peter Schiff, a senior Wall Street prophet, said on Thursday that the Fed had quietly launched a new round of money printing, which, while supporting global markets, would also make the Fed's debt bubble bigger and gold prices still undervalued. One of the Fed's main tasks now is to ensure that the debt bomb does not explode zha, and even whitewash peace if necessary.

Schiff speculates that printing banknotes is a stopgap measure. Now that the Fed's policy of printing money poses a fundamental threat to the dollar, the price of gold is rising to more than $1500 an ounce, and in other currencies it has set a new record.

In its latest commodities report, Westpac said risk aversion and global monetary policy easing would continue to push up gold prices until around mid-2020. The bank also believes that continued risk aversion is emerging as a result of international trade tensions superimposed on global monetary expansion.

The overall trend in gold prices is to rise by mid-2020, decline by the end of the year, and then rise again in 2021. In the long run, the bank expects gold to trade at $1535 an ounce in 2021. Risk aversion has been the main driver of gold price gains over the past few months and will continue to be an important force driving gold prices higher in the coming year.

SMMnews