The Zhitong Finance App learned that Li Gangfeng, a special analyst at European Natural Resources Fund Commodity Discovery, wrote in Refinitiv Refinitiv Refinitiv that unless the Federal Reserve cuts 50 points in one go on September 18, the reduction of only 25 points is likely to trigger the traditional investment wisdom of “buying in the midst of rumors and selling after the news is confirmed”. After all, the (Western) market began deploying interest rate reduction transactions as early as the first half of 2023, so it's time to make a profit. In other words, US stocks are likely to peak this month (if Trump is elected, US stocks may still have a honeymoon period of about half a year), gold may be used as a cash machine, and the price of gold may also be lowered when the stock market falls. However, looking at it now, every time the price of gold falls sharply, capital flows into a slump.

Data source: CFTC/LSEG Workspace

For easy comparison, the metallic equivalent of COMEX gold is divided by 10, and the metallic equivalent of COMEX silver is divided by 100.

Currently, the referential properties of Nymex palladium are very low

As of last Tuesday, there was a decline in bulls and a sharp increase in bears in US futures, leading to a net rebound, reflecting the market's beginning to shift from interest rate reduction transactions to recessionary trading.

The slight decline in US gold fund bulls of 3% from last week was the second week in a row; fund bears rebounded 14% at the same time. As a result, fund holdings fell back from a net increase of 737 tons to 705 tons, which was the 47th consecutive week of net fund growth (previously 46 consecutive weeks of net gain), and 78% of the all-time high of 908 tons in September 2019 (down from the highest level in recent years). As of September 3, the dollar gold price increased by 20.7% this year (+22.3% in the previous week), and fund bulls increased by 35.9% during the same period (+40.5% in the previous week).

Silver, which is highly correlated with gold prices, has always been more volatile than its wealthy cousin. US silver bulls fell 8% month-on-month; fund bears surged 56% month-on-month. As a result, fund holdings fell from a net increase of 5,487 tons to 4,121 tons to the lowest level in the past three weeks, and had a net increase of funds for the 26th week, at the same time as 27% of its peak period. From this year until September 3, the dollar silver price increased by 18.0% this year, while silver fund longs accumulated +12.9% (+22.3% the previous week), and bears cumulatively fell 24.1% (-51.2% the previous week).

Meibo Fund bulls fell 10% month-on-month last week; however, as bears surged 45% at the same time, the result last week fell from a net gain of 5 tons to a net shortfall of 17 tons, the lowest level in the past 26 weeks, ending two consecutive weeks of net fund growth. The longest time in history that Meibo Fund had a net gap of 31 consecutive weeks (April 2018 to October 2018).

The US Palladium Fund's net balance recovered to 40 tons and continues to hover at its lowest level in history. Even though the big bull market for palladium is over, if palladium remains at a huge margin level for a day, it may be difficult for other precious metals to completely change their trend. The US Palladium Fund's holdings have been at a clean level for 94 consecutive weeks and have been in the longest gap in history.

The Fund's net multi-year rise in US futures gold has increased 67% since the beginning of the year (cumulative increase of 101% in 2023)

Data source: CFTC/LSEG Workspace

The fund's net increase in US futures silver over the years has increased 56% since the beginning of the year (cumulative decline of 44% in 2023)

Data source: CFTC/LSEG Workspace

The fund's net decline in US futures platinum was 164% since the beginning of the year (cumulative decline of 7% in 2023)

Data source: CFTC/LSEG Workspace

The Fund's net US futures for copper have declined 3% since the beginning of the year (cumulative decline of 0.3% in 2023)

Data source: CFTC/LSEG Workspace

Basically, it can be clearly seen from the chart above. Even though global inflation has heated up in the past few years, the prices of all types of metals have declined to varying degrees. The main reason is that the futures market lacks funds to go long to drive the leverage effect. If someone had a crystal ball in their hands a few years ago and learned that the current global inflation, war, and various uncertainties this year are taking long periods of time, they are likely to lose money as a result. The most ironic thing is that since the global spread of the epidemic in 2020, the net value of precious metals has continued to decline, reflecting that funds have a purpose to prevent precious metals from rising.

The CFTC weekly report for American Copper began in 2007. Since copper was a bear market from 2008 to 2016, it is not surprising that much of US copper's history is at a clear level. However, starting in 2020, due to the impact of the global pandemic on the supply side and mine operations, and the market expected strong demand for copper in trams, copper prices rose and reached a new historical high. However, the current global investment philosophy is that the world has entered a recession, and demand for commodities has declined.

As we get closer to the US presidential election (October), or 2025, we should be careful of falling copper prices. Copper prices are highly correlated with US stocks.

The gold price versus gold mining stock index, which has important implications for short-term gold prices, has been updated. Last week, the ratio of US dollar gold price/North American gold mining stocks rose:

Data source: LSEG Workspace

As of Friday (6th), the ratio of gold price/North American gold stocks was 17.37X, up 6.8% from 16.27X on the 30th. Twenty-nine weeks ago, the ratio hit a new high of 19.22X this year (at closing price). It is currently up 5.7% for the whole year. There was a cumulative increase of 13.2% in 2023 (+6.4% in 2022). The highest ratio in 2023 was 17.95, and the lowest levels in 2023 and 2022 were 13.99X and 11.24X in January, respectively.

Tracking overseas gold mining stock prices is one of the most reliable forward-looking tools. That is, if gold prices continue to rise but gold mining stocks fall sharply, you should be careful.

Gold to silver ratio

The gold to silver ratio is one measure of market sentiment. Historically, the gold-silver ratio has operated at about 16-125 times the level:

Data source: LSEG Workspace

The more fearful the general market is, the higher the gold to silver ratio. For example, in 2020, due to the spread of COVID-19 around the world, the gold to silver ratio once rose 120 times to a record high.

The hardware to silver ratio index was 89.43 last week, up 3.1% month-on-month, and has risen 3.1% this year. The cumulative increase in 2023 was 14.0%, and the highest and lowest levels in 2023 were 91.08 and 75.93, respectively. It fell 3.1% in 2022.

Note that whether it is the US dollar gold price/North American gold mining stock ratio or the gold to silver ratio, there is a clear trend of bottoming back up. Financial markets have clearly entered recession trading.

The market expects the probability that the US interest rate will be cut by 0.25% in September

The market believes that in the interest rate negotiations on September 18, the probability of a 0.5% reduction in one go will plummet from 49% five weeks ago to 30% last Friday:

Photo Credit: CME Group

This is the futures market forecast US interest rate probability distribution chart for December 2024:

Photo Credit: CME Group

As of last Friday, the mainstream market believed that the US would cut interest by 3-4 times this year (the probability of cutting interest rates twice has dropped to zero), or equivalent to a 0.75%-1% reduction this year.

More than a month ago, the market thought that the US was 64.9% likely to drop to 4.50%-4.75% at the end of the year, but now this chance has dropped to 8.7%. The market believes that the pace of US interest rate cuts will be more aggressive than the previous week, and the chance of cutting interest rates to 4.00%-4.25% has soared to 42.7% from 21.8% a week ago. This adjustment of the market's US interest rate expectations this year once again confirms what has been said: after a long period of verification, the futures market's predictions of US interest rate trends, especially long-term expectations, are generally wrong.

Not to mention the US economic data; in fact, they are all just excuses for big market ups and downs. However, as has been emphasized, the downward trend in the market clearly suggests a gradual reduction in risk asset holdings. Obvious clues include:

The gold to silver ratio and the US dollar gold price/North American gold stock index have long been confirmed to have bottomed out and rebounded, reflecting increased risk awareness in the market.

The US Department of Labor revised the data on new jobs added in the past year downward, indicating that the market misjudged the US economic environment.

Ba County announced that it has continuously reduced its Bank of America (Bank of America) holdings since mid-July. The group holds a lot of cash, and it goes without saying that Ba Lao's views on US stocks are self-evident.

The amount of Nvidia shares purchased by retail investors reached a record high of 5.9 billion US dollars in August (compared to May, retail purchases were more than 600%). Obviously, the funds and company management delivered goods, and retail investors were at a high level.

In fact, it's not too difficult to make money in the long term by investing in the market. Apart from being bold, careful, and responding quickly, it is nothing more than following the public when things are going smoothly, but when the inflection point appears, they act against humanity. In foreign countries, it is also possible to make money if the market rises and falls.

Unless the Federal Reserve cuts 50 points in one fell swoop on September 18, the 25 point reduction is likely to trigger the traditional investment wisdom of “buying in the midst of rumors and selling after the news is confirmed”. After all, the (Western) market has been deploying interest rate reduction deals as early as the first half of 2023, so it's time to make a profit. In other words, US stocks are likely to peak this month (if Trump is elected, US stocks may still have a honeymoon period of about half a year), gold may be used as a cash machine, and the price of gold may also be lowered when the stock market falls. However, looking at it now, every time the price of gold falls sharply, capital flows into a slump.

The biggest test in the next 12 to 24 months is if the US starts cutting interest rates, but inflationary pressure regains its upward trend, where should the Federal Reserve go?

Don't ignore that the situation in the Middle East will deteriorate at any time; it is not ruled out that Chun Jiang Ya will deploy gold early in response to the situation in the Middle East.

Despite the recent appreciation of the local currency, it was only a transitional reversal after the previous strong dollar became crowded in trading. In particular, although there was a general rebound in the environmental stock market last week, the bias is to believe that this rebound is only false fire/luring more capital into the market. Therefore, I personally recommend taking advantage of this rebound (but not sure how long) to gradually reduce risk asset holdings and maintain profits.