Delta is rampant and inflation is high. What is the mid- to long-term outlook for gold?

In recent times, there has been no obvious trend in the gold market, and the overall trend is still dominated by shocks. Today, I will briefly talk to you about the medium and long-term trend of gold.

Now the market mainly has these several focuses:

New crown virus delta rages-economic growth uncertainty increases

There is room for inflation to fall-but the base has increased significantly

The market expects that the Fed may announce its withdrawal from QE from September to October, but there is still uncertainty.

The high infectivity of the new coronavirus delta strain increases economic uncertainty

According to the New York Times report on the 30th, according to the CDC internal documents obtained by the US Centers for Disease Control and Prevention, the new crown mutant strain Delta spreads fast, and the basic infection number R0 value (the number of people infected by each infected person) is as high as 8-9 people, the R0 value of the original strain of the new crown virus is 2, so it is more transmissible.

According to CDC data, as of now, more than 164 million people in the United States have completed the vaccination, with an inoculation rate of 49.5%.

The vaccination rate in southern states generally lags behind other regions.

On July 30, local time, there were more than 190,000 new confirmed cases of the new crown in the United States, the highest value since the January winter peak in the country.

Under this circumstance, the recovery of the US economy will inevitably be affected, and the extent of the impact is not easy to assess, and there is great uncertainty.

Now the market is more skeptical about the recovery of the US economy.

The latest second quarter GDP growth was also lower than market expectations. With the further deterioration of the epidemic, there is currently no way to maintain optimistic expectations as to how far the economy can grow in the third quarter.

The upcoming non-agricultural data has become the focus of short-term market attention.

The current market expects that non-agricultural employment will increase as much as 920,000 in July. If it can reach this level, it can increase confidence in employment and economic recovery.

If the data is unexpectedly lower than expected, it means that the Fed's plan to reduce QE is likely to be further delayed. This will help gold to move up further.

Inflation data is at a high level and is expected to fall in the medium and long term, but overall it has risen significantly from 2020.

The annualized quarterly rate of the second quarter core PCE price index of the United States announced this week was 6.1% higher than the expected 5.9%, indicating that inflation is still at a very high level.

The market originally expected that inflation would fall significantly, mainly due to the base effect, economic recovery, supply chain recovery, and increase in the supply of raw materials.

At present, the epidemic still has a relatively large impact on the recovery of the economy and supply chain, while the prices of raw materials are still high, such as copper prices and oil prices. At the same time, economic recovery will also lead to an increase in demand, thereby pushing up inflation.

Therefore, inflation may fall, but it may continue to be higher than 3% in the second half of the year.

From this perspective, as an anti-inflation product, gold still has a certain allocation value in the long run. Note that I am talking about long-term configuration value.

From 2000 to 2016 this round of ups and downs, gold adjusted from 1900 US dollars to 1050 US dollars. While this round of gold rose to a maximum of 2070 US dollars, the adjusted low point should be significantly higher than 1,100 US dollars. The possible area is the $1400-$1600 area, of course, this is a rough estimate, not necessarily correct.

In short, due to the huge amount of money released by global central banks in the past two years, the relative value of gold has increased significantly. There should be no problem at this point.

The Fed can only continue to observe the situation, which is positive for risky assets, but the market is worried about when the boots will land.

Due to the uncertainty of economic recovery, especially the uncertainty of the impact of the new coronavirus delta strain on the economy, the Fed can only continue to observe.

The Fed’s policy goal is to increase employment and stabilize inflation. But under the current circumstances, the Fed is more concerned about employment growth and recovery. At present, there is a gap of about 7 million before the employment recovery before the epidemic last year. The economic recovery looks far less strong than expected.

If you start to reduce QE now, it is likely to have a negative impact on the economy. Therefore, the attitude of the Fed meeting at the end of July is basically the same as my judgment last week. Then gold rebounded, but we saw little strength.

In the medium term, the biggest factor affecting gold and even the global financial market is when the Fed will begin to reduce QE, which means that the Fed will reclaim liquidity. There will be pressure on the stock market and commodities. The pressure on gold and silver will also be very high. So for the time being, I have reservations about the upside of gold and silver in the near future.

technical analysis

It was pointed out last week: "Technically, spot gold can still pay attention to the important support of $1795-1790. If it falls below this position, it will most likely test the support of $1760-1750. If this area is not broken, it is expected to test the pressure of $1,830. "The actual situation is that the market has fallen back after testing the $1,830.

Technically, $1835 is the key pressure. It is not easy to break through in the short term. If the spot gold price is above US$1,820 next Friday, we can pay attention to whether non-agricultural data can help gold break through this position.

Another support is $1790. $1790 is the lower support in the last two weeks. The uptrend support in April is currently around 1780 USD and is gradually moving upwards. It is expected to move up to around 1790 USD on Thursday. Therefore, a break below $1790 is a better short-selling opportunity. Conversely, if it stabilizes at this position, it will continue to maintain a shock in the region of $1790-1830.