Affected by the possibility that the US Federal Reserve may raise interest rates earlier than expected and the strength of the US dollar, the gold price in the past June hit its biggest monthly decline in four and a half years.
After entering July, gold futures rebounded slightly due to short covering. But analysts still believe that gold will continue to fall in the second half of this year and next year, and Morgan Stanley, the most bearish, expects gold prices to fall below $1700 / oz in the second half of this year.
Gold’s worst monthly trend in four and a half years
On Wednesday (June 30), the price of gold futures for August delivery on the New York Mercantile Exchange closed at $1771.60/oz, making gold futures fall by more than 7% in June, the biggest monthly decline since November 2016.
Previously, novel coronavirus pneumonia had surged to over 2000 US dollars / ounce in August 2020, amid fears of the impact of the new crown pneumonia epidemic on the global economy. But since the vaccine was launched in the United States and Europe, investors have become more optimistic about the economic recovery, and gold prices have begun to be affected.
For this decline, analysts believe that the biggest reason is that the Federal Reserve suddenly turned “Eagle”, suggesting that in order to prevent inflation out of control, it may raise interest rates earlier than market expectations and eventually reduce the quantitative scale, because higher interest rates often translate into higher opportunity costs of holding non interest gold.
The strength of the US dollar also put pressure on gold. While gold prices recorded the worst monthly trend in four and a half years, the US dollar index recorded its best trend since March 2020 in June.
“There is not much demand for gold at the moment.” Suzanne Hutchins, fund manager at Newton investment management, said: “gold is a good ‘barbell’: when inflation is really high, it won’t be affected; When deflation is serious, it won’t be affected, but the problem is that we are in the middle of [inflation]. ”
Hutchins revealed that his fund has reduced its position in gold and gold stocks to about 6% from 18% last year.
This is not a case in point. Net long gold futures positions held by hedge funds fell to a seven week low, according to the CFTC.
Overnight (July 1), gold futures rose 0.35% to $1776.12/oz. Michael matousek, chief trader at U.S. global investors, attributed the small rally to speculative bargain hunting in the “oversold” market.