Events
According to Hong Kong’s Wande news agency, in the early morning of March 17 Beijing time, the Federal Reserve announced its interest rate resolution for March, announcing a 25 basis point increase in interest rates, and the target interest rate range of federal funds rose to 0.25-0.50%, in line with market expectations.
Comments
Before the release of the news of interest rate increase, the gold price fluctuated significantly, and the gold fluctuated upward after the release. First of all, before the announcement of the Fed’s March interest rate resolution on the same day, the global gold price showed a certain range of volatility affected by the expectation of raising interest rates, with a single day high of US $192657/oz and a minimum of US $190522/oz. Secondly, with the release of the Fed’s interest rate hike, gold prices fell briefly and rebounded rapidly. In this process, the lowest price of gold hit US $189567/oz, while in the process of subsequent upward shocks, the price of gold reached a maximum of US $193484/oz two hours after the interest rate hike. The upward trend of the fluctuation of gold price after the interest rate hike reflects that the current market’s bad expectation of the Fed’s interest rate hike is gradually released.
In the short term, interest rate hikes are expected to be further released, and gold has entered an important allocation time point. Gold market is highly liquid, and market expectation often plays an important role. Before the Federal Reserve announces the official interest rate hike, the gold price will usually fall under the influence of the market interest rate hike expectation, and when the interest rate hike actually falls, the gold price will usually rise. Looking back on the past six interest rate hikes, the average rise and fall of gold in the year, half a year and one month before the Fed’s interest rate hike were 10.37%, – 0.99% and – 1.32% respectively; The average increase and decrease in the following year, half a year and one month were 6.67%, 7.81% and 0.02% respectively. The performance of the gold market after the interest rate increase is better than that before the interest rate increase, indicating that the release of market concerns has played a positive role in promoting the gold price.
The macro economy is still fragile, and gold has long been logically dependent. First, the impact of interest rate hikes on inflation is limited. This round of interest rate hikes may be difficult to bring substantial relief to the high level of inflation. During the past six interest rate hikes, the year-on-year growth rate of CPI in the United States continued to rise. Specifically, during the six interest rate hikes, the year-on-year growth rate of us CPI increased by 0.7pct, 4.0pct, 0.3pct, 1.1pct, 1.0pct and 1.7pct respectively.
According to the latest inflation data disclosed by the U.S. Department of labor, the year-on-year growth rate of U.S. CPI in February 2022 was 7.9%, and the current inflation level is at the peak of 40 years. Therefore, it is expected that the overall inflation level of the United States may still maintain a high trend in the process of this round of interest rate increase, and drive the gold price to continue to strengthen.
Secondly, the US economy is facing the risk of recession, and the market has shown obvious concern. From the perspective of the interest rate spread of us long-term and short-term treasury bonds, as of March 16, 2022, the interest rate spread of us 10-year-2-year treasury bonds has been reduced to 0.24%, indicating that the current market has some concerns about the short-term economic recession. Thirdly, the Fed’s interest rate hike may have a certain impact on the US economic status and reduce the attractiveness of the US dollar. Since 1980, during the six interest rate hikes in the United States, most of the changes in the global share of GDP have declined. The interest rate hike process is expected to continue for a long time. According to the latest dot matrix released by the Federal Reserve, the Federal Reserve is expected to raise interest rates six times this year. Therefore, this interest rate increase process may bring some disturbance to the global economic status of the United States, which will reduce the attractiveness of the US dollar and push up the price of gold denominated in US dollars.
Investment advice
Under the background of continuous upward gold price, relevant production enterprises in the gold industry may benefit, such as:
Zijin Mining Group Company Limited(601899) , Western Region Gold Co.Ltd(601069) , Chifeng Jilong Gold Mining Co.Ltd(600988) , etc.
Risk tips
International geopolitical changes, abnormal fluctuations in commodity prices and changes in macroeconomic policies.
