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SunSirs: Hedging Sentiment Sparked Enthusiasm in Chinese Precious Metals Market

May 19 2020 08:34:44     SunSirs (Linda)

On May 18th, Shanghai silver 2006 was quoted at 4,201 yuan / kg, and the daily limit was closed; silver 2012 daily limit price was 4,248 yuan / kg; Shanghai gold hit a new high since 2008, gold 2012 quoted 401.42 yuan / gram.

Precious metals spot prices rise

According to the data of the trading company, the spot prices of domestic precious metals, gold and silver, both rose on May 18. Among them, the spot price of gold rose by 2.70% daily, and the spot price of silver rose by 6.55% daily.

Risk aversion detonated market enthusiasm

1. The latest data released by the United States shows that both retail sales and manufacturing output in the United States recorded a record decline in April. Among them, the monthly rate of retail sales in April in the United States fell by 16.4%, the largest decline since record in 1992, and the second consecutive month of record decline, the previous value fell by 8.70%, the market is expected to decline by 12%. On the same day, the monthly rate of US manufacturing output in April fell by 13.70%, the previous value fell by 6.30%, and the market is expected to fall by 14.60%. The US economic data is not optimistic.

2. US President Trump's remarks on Sino-US trade have cast a shadow on the trade agreement reached with Beijing in January, and even hinted that it may cut off relations with Beijing. The trade between China and the United States is not optimistic.

Last Friday, when the Trump administration announced that it would prevent global chip makers from exporting semiconductors to Huawei Technologies Co., Ltd., tensions intensified. In response, China stated that it is preparing to include US companies on the "Unreliable Entity List," which may include Apple, Cisco Systems, and Qualcomm. China also said it may suspend the purchase of Boeing aircraft.

3. In an interview with CBS, Fed Chairman Powell released a heavy signal, saying that the FED ’s ammunition has not been exhausted, and more measures can be taken if necessary. Negative interest rates may not be an appropriate or useful policy for the United States. Powell also stated that the US GDP in the second quarter may "very easily" reach a contraction of 20% -30%. FED policy also has tools, and negative interest rates are good for precious metals. Precious metals have always been regarded as a tool to hedge inflation and currency devaluation.

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