Multiple positive support gold still has the potential to rise

    London Gold is currently well above its 2011 record high of $1,921.15 an ounce and is on track to hit $2,000 in the near future.In my opinion, the sustained rise of precious metal prices is mainly driven by the decline in real yields of US Treasury bonds driven by rising inflation expectations, as well as the price support from the sharp decline in the US dollar index and risk aversion factors.In addition, there is still some inertia in these positive developments, which will continue to push up the price of gold in the short to medium term.Overall, this year, the gold price is expected to continue the strong upward trend, can take a callback long precious metals strategy.Short-term focus on gold above resistance at $2,000 and support at $1,880.

The dollar index continued to weaken

    The Federal Reserve ended its interest rate resolution on July 30, maintaining the interest rate range of 0~0.25% and the excess reserve ratio (IOER) at 0.1%. Since the outbreak of the epidemic in the United States on March 15, the Federal Reserve has kept the interest rate unchanged.On the asset side, the Fed decided to buy Treasuries and MBS bonds at the current pace and extended its temporary dollar swap line and temporary repurchase agreement facility until the end of March.Weekly jobless claims rebounded for the first time since March, and second-quarter GDP fell by the largest amount on record.According to the epidemic data, more than 50,000 new cases were confirmed in a single day, and the second outbreak may be more severe than the first outbreak.The Fed's decision implied pessimistic expectations about the impact of the epidemic on the US economy and therefore kept monetary policy loose.

    The real yield of US Treasuries is the difference between the nominal interest rate and the inflation level. The nominal interest rate of 10-year US Treasuries has been in the range of 0.6%~0.75% recently, but the real yield of US Treasuries has been falling continuously, with the lowest down to 0.92%.The difference between the two has risen from 1.0 per cent during the outbreak to 1.50 per cent in the recent past, so it is mainly due to rising inflation expectations that real yields have fallen.Gold can be understood as a zero-coupon bond, which does not carry interest, and its holding income mainly depends on capital gains.When real yields on US treasuries continue to fall, gold has a relative advantage.However, the second outbreak of the epidemic in the United States will still bring some troubles to the economy, and the high probability of nominal yield rate will remain low in the future.In addition, QE by the Federal Reserve continues, with Treasury and MBS holdings on its balance sheet reaching $6.2 trillion, up $2.4 trillion from before the outbreak.QE continues to lead to monetary overshoot, which will continue to lead to higher inflation expectations.With nominal yields remaining low and volatile, inflation expectations are rising, so real yields still have room to fall, setting the stage for precious metals to rally.

Investor risk appetite is back

    The United States, the worst-hit region in the world, showed a trend of a second resurgence of the epidemic, which led to the recent rise of the American stock market.Major European countries and China are under control, their economies continue to recover, the euro and yuan continue to strengthen, while the DOLLAR index is under pressure.

    Global gold trading mainly USES us dollar pricing, so the US dollar index and gold price have a certain negative correlation, the recent rapid decline of the US dollar index has also brought support for the gold price.At 93, the DOLLAR index is not historically low and has room to fall as the US economy continues to struggle with the pandemic.Total holdings in the world's major gold etfs reached 106 million ounces, up 24 million ounces or 22 percent since the start of the year, according to Bloomberg.At present, the increased demand for safe haven of precious metals caused by economic uncertainty and the decline in real interest rates cause precious metals to get more investment funds preference.With holdings well above the $1,921 an ounce reached in London in 2011, there is more room to imagine an upward trend in the price of gold with more money to invest.