Key Macro Chart: Gold Surge Indicates Fed Policy Mistake? (2024/9/25)
Key Macro Chart: Gold Surge Indicates Fed Policy Mistake? (2024/9/25)
Oil Market Demand
Since 2013, China has been a major driving force for global crude oil demand. Currently, China's implied oil demand is around 16 million barrels per day, making it the world's second largest oil consumer and the largest crude oil importer. So why is it said that when China sneezes, the global oil market catches a cold? The following graph perfectly illustrates the reasons.
On the surface, risk assets have been boosted by China's latest stimulus measures, but I believe that more actions are needed to achieve significant demand growth. The good news is that we are indeed moving in the right direction; the bad news is that the efforts are not sufficient yet.
Silver
We have been warning about the rebound in silver prices since the low point on August 8th, and now it's time to welcome a new historic surge. This time, silver prices will break out of a 45-year cup and handle pattern, so the potential for this surge could be huge, with targets possibly exceeding $70.
Gold vs. Copper Prices
Analyst: The recent strong rise in gold prices may indicate that the base metals market is also about to see a similar trend. Historical experience shows that key turning points in base metals (green arrows) often coincide with significant increases in gold prices (yellow arrows). I believe that copper prices may be preparing for a significant rally to catch up with this trend.
Logic Behind Strong Gold
Analyst: Since July, gold has been in a strong uptrend, outperforming the S&P 500 index and the 7 major U.S. stocks. The heating up and implementation of rate cut expectations have provided strong support for gold. What signal does this release? Is it a harbinger of policy mistakes? (Because gold is seen as a hedge against inflation)
Some argue that the rise in gold is not due to the Fed's easing, but rather the impact of two geopolitical wars, I disagree with this view. Look at the following chart: The marginal changes driving the rise in gold are not wars (black and red marked areas), but rate cuts (rate cut expectations + actual rate cut actions, green marked area).
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