Beware of The Ideal Data on The Number of New Unemployment Claims in The US Constitutes Selling Pressure on Gold Prices
Independent Analyst: Zhen QuanXi
Undertaking last night, US market gold price broke USD$2000/oz psychological barrier strongly. This morning, Asian Market undertaking US market continue to rise, reading a high of USD$2031/oz.
The reason for the sudden surge in the gold price is not only of deterioration of China and US relations. The following 5 points are all positive factors for the sharp rise in gold prices:
1. A new round of economic stimulus plan may be reached, stimulating inflation expectations.
2. USD weakened.
3. Low interest rate environment continued, and US bond yields fell.
4. The worsening of the epidemic will trigger a new round of hedging demand.
5. Over-issued currency.
It is sensible and reasonable to increase gold buying orders under the effect of hedging to push up the gold price, but if the excessive rise is out of the actual hedging demand, then the falsely high gold price will be mercilessly sold after investors realize.
As a simple horizontal comparison, in mid-March since the outbreak of the epidemic that caused the US stock market crash, the return on buying Nasdaq stock index futures is greater than the return on buying gold, and the holding cost of gold is higher and bigger than the holding cost of Nasdaq stock index futures.
It is not difficult to force if the passage of USD$1 trillion rescue economic bill will surely stimulate US stocks to continue to rise. At the same period, even if the gold price is also stimulated by positive, yet the increase will not catch up with the return of US stocks.
Therefore, it is possible that the investors will sell the gold holdings when the it is in upscale, and then start investing in the US stocks for greater returns.
We warned that people should not be overly optimistic about the sharp increase of the gold price in the future.
The latest data on the number of new applicants for unemployment benefits of the United States will be released on Thursday. If it is better than the previous data and the market expectation, the gold price will be pressured and slow down the increase.
The following announcement will be the non-farm payrolls employment statistics of the previous moth that released by the United States on Friday. As long as the data is not too bad, the market will identify it as the signal of the rebound of the US economy from the bottom. The gold price will then suffer a sell-off. Investors will sell out assets at a high price to lock to risks. Investors will then cash in and switch to the US stock market for greater returns.
Beware of the rise of the gold price that cannot break through 2030 and it’s possible that the breakthrough might not be high. It will be an ideal time to sell when the gold price turns below 2030. Activists can pay attention to the weak rebound after falling below 2020 to sell decisively in order to stop loss and return with great value.
After the profit is made, stop loss is suggested to protect the principal in order to track for greater profits. In case of being knocked, pay attention to the weak rise of every wave for the capital loss protection to strive for greater profits.
Non-farm Payrolls first goal (1996), second goal (1990), third goal (1984)
This article also covered in the Guo Ji Ri Bao newspaper issued on August 6, 2020.