The European Central Bank cut interest rates as scheduled, and precious metals and rubber futures soared late at night
Overnight session, rubber futures led the rise. Butadiene rubber rose nearly 7%, No. 20 rubber rose more than 5%, and rubber rose more than 4%.
In precious metals, as of this morning’s close, the main Shanghai gold contract rose 0.75 percent, the main Shanghai silver contract rose 4.54 percent, COMEX gold futures closed up 0.65 percent at $2,390.9 an ounce. Silver futures rose 4.3 percent to settle at $31.367 an ounce on COMEX. At the close of trading, spot gold was above $2,370 an ounce, up more than 0.7% on the day.
On June 6, local time, the European Central Bank held a monetary policy meeting and decided to cut interest rates by 25 basis points after maintaining high interest rates for 22 consecutive months, the main refinancing rate was reduced to 4.25%, the marginal lending rate was reduced to 4.50%, and the deposit mechanism interest rate was reduced to 3.75%. The last time the ECB cut rates was in September 2019.
“Based on the latest assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission, it is time to moderate the degree of monetary policy restraint after holding interest rates steady for nine months.” ‘The Governing Council will continue to follow a data-based, meeting-by-meeting approach to determining the appropriate level of restraint and will not pre-commit to a particular interest rate path,’ the ECB wrote in its announcement.
Market players: Precious metals still have room to rise in the future
For the strength of the precious metals sector on Thursday, Gong Ming, deputy director of the Jinrui Futures Research Institute, believes that the main reason for the rally in precious metals is that the number of “small non-farm” – ADP employment in May in the United States released on Wednesday was lower than expected. “The employment boom has fallen, on the one hand, prompting the Federal Reserve to cut interest rates in advance; On the other hand, the resilience of the US economy has been weakened. Therefore, the short-term weakness of the dollar has also helped precious metals.” She said there have also been some changes in the recent geopolitical conflict, after Biden proposed a cease-fire, but Hamas demands a full end to the Gaza war and Israeli withdrawal, cease-fire negotiations may run aground.
Ye Qianning, a precious metals researcher at Guangfa Futures, said that since April, the gold basis has declined significantly, and although the basis has rebounded after May, there is still a gap between the level before March. In the first quarter of this year, the total domestic demand for gold jewelry was 184 tons, down 6% year-on-year, and futures inventories rose sharply after May, reflecting the current physical consumption demand for gold was suppressed, which also limited the space for gold prices to rise.
Gu Jiannan, assistant general manager of Haitong Futures investment advisory Department, believes that the rally in the precious metals sector on Thursday was affected by two events the night before: first, the Bank of Canada started to cut interest rates, and the second is that the “small non-agricultural” data in the United States was lower than expected. “In the latest week, US economic data continued to be lower than expected, US Treasury yields continued to decline, interest rate cut expectations gradually rose, the fundamentals of precious metals have strong support, but in the previous few trading days, other commodities represented by crude oil generally adjusted, led the precious metals down.” ‘he said.
Ye Qianning said that at the beginning of this week, due to the Opec + production cut less than expected, the Indian election result surprised the market and other factors, the market sentiment was cautious and temporarily left, the price of crude oil and other industrial products fell, dragging down precious metals, and the gold price once fell below the 20-day average support. On the evening of June 5, the Bank of Canada announced a rate cut as scheduled, while the number of ADP jobs in the United States fell sharply in May, the speed of economic recovery in the United States or further slowdown, enhancing the Fed’s interest rate cut expectations, superimposed on June 6, the European Central Bank also announced a rate cut, under the influence of monetary policy is about to turn to easing factors, market sentiment improved rapidly, precious metals also stopped falling.
“At present, the main reason for the increased volatility in the precious metals market is the frequent volatility of interest rate cut expectations.” Gong Ming said that the recent US economic resilience weakened, inflation, employment and economic growth data often repeated, and there are contradictions between various economic indicators. Since May, the Fed has struggled to balance economic resilience with inflation stickiness, so expectations management has gone back and forth.
Looking ahead to the future market, Gong Ming believes that precious metals are still expected to have a short-term correction, but the space for a correction is limited. In the short term, there is greater uncertainty about the actual path of the Federal Reserve’s interest rate cut, and the possibility of actual interest rate cuts in June and September is low. But given that real yields have risen significantly, the scope for further upside is limited. At present, the excess savings of US residents have been exhausted, and there is downward pressure on economic resilience. The space for this precious metal correction is limited, and investors are advised to focus on the support level of $2300 / ounce. In the medium and long term, under the background of geopolitical conflicts and anti-globalization, the probability of precious metals will further rise.
Ye Qianning believes that short-term precious metals are affected by macro news, and the frequency of fluctuations may rise and form a wide volatile market. Despite the ECB’s interest rate cut, the recent rebound in prices in the euro area has implications for the pace of subsequent monetary policy easing. In the case of gold prices remain relatively high, the Chinese central bank has recently reduced the scale of gold purchases, while physical consumer demand has also been affected, and gold futures inventories have risen significantly, reflecting relatively sufficient supply. Gold’s upside is limited due to the lack of new bullish drivers. In the second half of the year, the US economy is likely to accelerate deterioration, employment and inflation will further weaken, and the Fed policy will be changed. The price of precious metals is optimistic in the long term, and in the process of adjustment, it is suggested that investors can choose to buy on dips.
Gu Jianan said that the most important data in the short term is the non-farm employment data on Friday evening, and the market is now expected to be 190,000, and if the final data is within the normal range of 200,000, or further raise interest rate cut expectations, prompting precious metals to further rise. In addition, the US inflation data for May is also very important. In the second half of the year, with the rapid decline of the housing component, inflation is also likely to further decline. Throughout the year, the current monetary policy of the Federal Reserve from the tightening cycle to the easing cycle of the point, and the central bank’s gold buying behavior on the one hand to amplify the rise of precious metals, on the other hand will reduce the space for precious metals callback, precious metals prices still have room to rise in the future.
