On Wednesday, gold prices surpassed $1500 an ounce and appear to continue to rise.
New Zealand, India and Thailand cut interest rates unexpectedly. New Zealand cut overnight interest rates by 50 basis points, India by 35 basis points and Thailand by 25 basis points. All three central banks emphasized weak economic growth in their wording. At the same time, influenced by the weak global economic outlook and easing expectations of central banks, bond yields of all countries are in the process of sustained decline. The yield of 10-year U.S. Treasury bonds fell to the lowest level since 2016, and briefly fell below 1.6%, while the yield of German bonds has gone further and further in the negative yield range, including the 10-year period. Bond yields fell to an all-time low of -0.6%.
When the Federal Reserve makes further compromises on interest rate cuts this month, it could be a catalyst for gold prices to reach $1,600 an ounce. Recently, dove arguments within the Federal Reserve have become increasingly evident. In the early hours of Thursday, Chicago Federal Reserve Chairman Evans said that the Federal Reserve had substantially relaxed its policy since the end of last year, but concerns about low inflation and trade prospects may mean further interest rate cuts. Risk management concerns, he said, are that the Fed needs to use more policy tools ahead of time to prevent a possible economic downturn and possibly to justify more easing by the Fed when interest rates are close to zero.
Meanwhile, Trump said yesterday that the Fed must cut interest rates "more dramatically and faster" to make the United States competitive with other countries. "Our problem is that the Fed is too proud to admit that it is acting too fast and that it is making too many mistakes in tightening policy. They have to cut interest rates more dramatically and faster and stop their absurd quantitative tightening now," Trump said.
Institutional surveys show that if the Fed cuts interest rates by 50 basis points this year, it will weaken the dollar even more dramatically, so the Fed may reduce the pace of interest rate cuts appropriately to prevent excessive fluctuations in the dollar.
According to LPL Research, August has been the worst month for the S& P 500 index since 1950, with an average return of 0.05%. August was also the weakest month in the past 10 and 20 years. With the severe trade conflict, the market is likely to usher in another turbulent August; gold demand climbed to 2181.7 tons in the first half of 2019, the best performance in three years, mainly due to increased demand for gold ETF and record central bank buying. The factors driving gold demand include geopolitical uncertainties, an increase in global negative yield bonds and a rise in gold prices; the weakening of the U.S. dollar (expected to be so) is one of the three "key factors" in the gold bull market; the more relaxed Federal Reserve and rising geopolitical risks.
BofA Merrill Lynch said there was still room for gold to rise, reaching $1,500 an ounce next year, or even the potential to rise to $2,000. One of the major supporting factors for gold prices in the future will be the failure of quantitative easing by the central bank. Several successive rounds of monetary easing have had a series of side effects. In addition to falling interest rates, there are currently about $14 trillion of bonds with negative yields (including German 30-year bonds). This has been a key factor in driving the recent rise in gold prices. With more easing policies in place, the rise in gold prices is likely to sustain the buying of gold.
Looking from the daily line, if gold continues to oscillate around 1510 and breaks through 1510 in the short term, it may hit around $1600 to $1610. If it breaks below 1475 in the short term, it will be possible to pull back the shock, which remains to be seen.