Sive Morten
Special Consultant to the FPA
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Fundamentals
Gold market has got the same upside impulse from CPI slowdown as other markets this week. And yesterday, we've tried to take a look at 3-6 month perspective, which doesn't look absolutely cloudless, because we have facts that potentially inflationary and our position is a bit different on perspective of CPI dynamic in the future and Fed steps.
But Gold stands a bit separately from other financial markets, because it also has its own driving factors, which could make its dynamic different. BRICS summit in August, massive gold repatriation means that people are preparing to big events.
Market overview
Gold prices eased on Friday but were on track for their biggest weekly gain since April, after signs of slowing U.S. inflation raised expectations of a pause in Federal Reserve's interest rate hikes after this month. Bullion hit its highest since June 16 earlier this week after data showed U.S. consumer prices in June registered their smallest annual increase in over two years, prompting bets the Federal Reserve could soon end its rate-hike cycle.
U.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside. In the 12 months through June, the CPI advanced 3.0%, compared with Reuters estimates of 3.1%.
Meanwhile, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, indicating that the labor market remained tight.
On the physical front, Indian dealers offered discounts on physical gold purchases for a third straight week as high domestic prices dented retail demand. The United Arab Emirates removed refinery Emirates Gold from its "good delivery" list certification scheme, the government website showed.
The dollar index (.DXY) fell to its lowest in more than a year, making gold more affordable to overseas buyers, while benchmark U.S. Treasury yields fell, cutting the opportunity cost of holding non-yielding bullion.
India on Wednesday restricted imports on plain gold jewellery, as the world's second-largest consumer of the precious metal tries to plug loopholes in its trade policy.
Import of articles of gold have been put under the restriction category from the free category, a government notification said, adding that import under the India-United Arab Emirates Comprehensive Economic Partnership Agreement would be allowed without any license. The move comes as importers over the last few months have been using a policy flaw to source plain gold jewellery from Indonesia without paying any import taxes.
Inflation is slowing fast enough to allow the Fed to stop tightening U.S. monetary policy after what is still widely expected to be an interest rate hike at its meeting in two weeks time, traders bet on Wednesday. Markets see a 91% chance of a 25-basis point Fed rate hike later this month. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion. Earlier this week, several U.S. central bank officials said that the end to the Fed's current monetary policy tightening cycle is getting close.
Russian Gold Miner Starts $6.3 Billion Buyback Amid LSE Exit. Polyus PJSC plans to spend as much as 579 billion rubles ($6.32 billion) on buying back shares as Russia’s biggest gold miner prepares to delist from the London Stock Exchange. The board approved the repurchase starting Monday of as many as 40.8 million shares at 14,200 rubles a piece, the company said in a statement. The price represents a premium of about 33% to the July 7 closing level.
An increasing number of countries are repatriating gold reserves as protection against the sort of sanctions imposed by the West on Russia, according to an Invesco survey of central bank and sovereign wealth funds published on Monday. The financial market rout last year caused widespread losses for sovereign money managers who are "fundamentally" rethinking their strategies on the belief that higher inflation and geopolitical tensions are here to stay.
Over 85% of the 85 sovereign wealth funds and 57 central banks that took part in the annual Invesco Global Sovereign Asset Management Study believe that inflation will now be higher in the coming decade than in the last. Gold and emerging market bonds are seen as good bets in that environment, but last year's freezing of almost half of Russia's $640 billion of gold and forex reserves by the West also appears to have triggered a shift.
The survey showed a "substantial share" of central banks were concerned by the precedent that had been set. Almost 60% of respondents said it had made gold more attractive, while 68% were keeping reserves at home compared to 50% in 2020.
Rod Ringrow, Invesco's head of official institutions, who oversaw the report, said that is a broadly-held view. "'If it's my gold then I want it in my country' (has) been the mantra we have seen in the last year or so," he said.
Geopolitical concerns, combined with opportunities in emerging markets, are also encouraging some central banks to diversify away from the dollar. A growing 7% believe rising U.S. debt is also a negative for the greenback, although most still see no alternative to it as the world's reserve currency. Those that see China's yuan as a potential contender fell to 18%, from 29% last year.
Nearly 80% of the 142 institutions surveyed see geopolitical tensions as the biggest risk over the next decade, while 83% cited inflation as a concern over the next 12 months. Infrastructure is now seen as the most attractive asset class, particularly those projects involving renewable energy generation. As well as China, Britain and Italy are seen as less attractive, while rising interest rates coupled with work-from-home and online shopping habits which became embedded during the COVID-19 outbreak meant property is now the least attractive private asset.
The Chinese are increasing their gold reserves, and the buildup of gold reserves by various central banks is basically a trend of the last year. It is noteworthy that with the growth of demand for physical gold, the price of gold has been relatively stable for the last 3.5 years and the last year in particular. The answer is simple. For the broad market, gold is a protection against risks. But the emerging holes in the liquidity of investors in the period preceding the acute phase of the crisis have to be closed, including the sale of paper gold. The graph shows that during the recession, the price is either flat or falling, as it was in 2008 (the red line is the export price index), and only then the growth.
FEW GEOPOLITICAL ISSUES
Although a lot of events have happened, as on foreign arena, as on domestic US political arena, we would like you to take a look at couple of them, that seem most interesting to us. Although we could talk a lot about recent NATO summit and decision to prepare Poland and Romania troops to be ready to step-in in conflict at first demand, but this topic was widely observed in the news. As well as increasing of US contingent in Europe. We're interested with a bit different thing.
First, is, our AUKUS block concept is getting the progress, in terms of China confrontation. As the US has started war with Russia by Ukraine hands as they want to burn Japan first, as their closest ally in the region. Washington and Tokyo are making plans to defend Taiwan against a potential attack by China, but Japan won’t commit its military. So they have been working out a plan for a conflict over Taiwan for more than a year, but talks have failed to resolve the main question: Will Japan join the war? According to people familiar with the talks, Washington has been pushing Tokyo to consider allowing the Japanese military to perform functions such as hunting for Chinese submarines near Taiwan, but has received no commitments. Obviously Tokyo is resisting, but does anybody have any doubts that the US will twist their hands and force to go slaughtered instead of the US? Personally I don't.
Here is the concept of wide AUKUS tightening belt around the China to control its access to world ocean and trade ways. It comes from South Korea & Japan, down to Taiwan, then to Phillipines (where US gets four new military bases) and Myanmar (aka Burma) where the US actively support military coup, imposing sanctions. The logic is simple - the only way to get into Indian Ocean by land goes through Myanmar, and its control will not let China to do it. Due to tough China - India relations, they can't get it via India. Also do not forget that Australia and NZ is also near and belong to AUKUS block.
Taiwan is vitally important in this strategy and China also understands this. That's why we suspect that no compromises are possible on this subject. Now it is just decided who first will be thrown in meat grinder. And it seems that Japan will among the first. As a response, China is preparing either and building 2nd missile silo field near north Russian border. As you understand this is not against Russia, because the trust level is unprecedented now between these two countries. But, this is the reason why the US is so hurry with decision of Taiwan question. China now has significantly less amount of nuclear warheads that the US and allies, but plans to increase it for few times to reach 1.5-2K amount by 2030. If they will achieve this, there will no "painless" way to AUKUS to defeat China. Time is ticking.
Second interesting issue, which is at first glance has no relation to geopolitics, but this is only until you not take a look at numbers. This is Goldman Sachs currencies level forecast. A detailed table for clients with rate forecasts up to three years in advance. In a fresh one ("Global FX dated July 7") report, we're particularly interested with the forecast for the ruble, hryvnia and Turkish lira. The three currencies of countries with, let's say, geopolitical and economic difficulties.
Ruble forecast: current price (as of July 07): 93.11, forecast for 3 months: 83.00, forecast for 2026: 92.00 rub/dollar (approximately 2% of the current level in total. Now attention - Lira: current: 26.1 -> 3 months: 28.00 -> for 2026: 31.00 (total ~20% devaluation. And Ukrainian Hryvnia: 36.9 -> 3 months: 36.6 -> for 2026: 57.5 which is total ~55% devaluation. Riddle: what solution of the Ukrainian question is supposed by these figures, from the point of view of American bankers? But don't tell me that this is only Goldman Sachs opinion. Any big whale, such as GS has non official information sources. If you're interested - you could take a look at other ones, including major currencies.
I do not know your thoughts, guys, but now it seems that Ukrainian question could be taken off the table soon, as the US turns to China confrontation. They can't fight on two fronts. Second reason - if even Russia will get the whole Ukraine, it will take a decade or even longer for adoption and doesn't change significantly the force balance in EU region. So they could return back to this question later. Things accurately follow to scenario that we've discussed few months ago. AUKUS are rare mentioned in headlines, but it doesn't mean that work is not going on the back.
BACK TO THE US AFFAIRS
The Federal Reserve got just what it needed – an even cooler-than-expected Consumer Price Index (CPI) report card for June. This could give the central bank a plausible excuse to back off its inflation fight. But make no mistake, inflation isn’t dead or buried.
Stripping out more volatile food and energy prices, core CPI remains in the hot category, but did show some signs of cooling. Month-on-month, core CPI rose 0.2% with an annual increase of 4.8%. Both numbers were slightly below projections. The month-on-month core reading was the lowest of the year. It remains to be seen if this was a trend or an outlier.
Looking at the monthly increases so far in 2023 reveals that core CPI remains sticky, the June number notwithstanding. It rose on a monthly basis by 0.4% in January, 0.5% in February, 0.4% in March, 0.4% in April, 0.4% in May, and 0.2% in June. That averages to 0.38% per month or 4.56% annually – still more than double the Fed’s 2% target.
To put that number into perspective, the annual core CPI increase in June 2022 was 5.9%. If you go by the core CPI, and everybody swears it’s a better price inflation gauge because it is less volatile, then you have to conclude that price inflation hasn’t dropped nearly as much as the headline number indicates. And you will notice that all of these numbers are above the Fed’s 2% inflation target.
Keep in mind, inflation is worse than the government data suggest. This CPI uses a formula that understates the actual rise in prices. Based on the formula used in the 1970s, CPI is closer to double the official numbers. Big drops in energy prices have helped bring the overall CPI down. Broadly speaking, energy prices have dropped by 16.7% year-on-year. Gasoline prices are down 26.5%. Outside of the energy category, the only prices that fell on a monthly basis were used cars and commodities.
The big drop in headline CPI is partially a function of math. A huge 1.2% month-on-month increase from a year ago dropped out of the calculation, bringing the yearly average way down.
This reveals the ugly reality. The Fed is wedged between a rock and a hard place. It needs to appear to be fighting hot price inflation, but the central bankers also don’t want to wreck the economy. So, they’re talking tough and hoping against hope CPI will cool enough for them to back down. They may have gotten their wish.
This CPI gives them some wiggle room to plausibly back out of the inflation fight. They can say, “Problem solved,” and begin the pivot back to more moderate interest rates. But the problem isn’t solved no matter what the CPI data says. As Peter Schiff pointed out in a tweet, declines in the CPI are weakening the dollar and raising the price of commodities, including oil.
To use Fed terminology, this cooling price inflation is transitory. In reality, the end of the inflation problem means the beginning of a new inflation problem because the Fed hasn’t addressed the root cause – an economy addicted to easy money.
Conclusion:
Now we have some silent period, when tectonic political shifts are become quiet, until new sharp turn happens. The economical factors meantime come on the first stage. And here gold probably joins to other markets. Obviously bullish sentiment should last for some time, at least for two months, when we get next Fed meeting in September. Existence of safety margin in a way of RRP balance and Banking reserves in the Fed, provides time to US Treasury and Fed to postpone some vital decisions. Meantime, the appetite for the cash of the US Government and US Treasury is rising like the snowball - 850 Bln was borrowed in just 6 weeks. This is outstanding pace. Mostly borrowings are financed by RRP balance, but soon this party might be over. We suggest that big shifts might happen in winter. Besides, it is interesting what will happen on BRICS summit in August, when there will be no Fed meeting and when supposedly should be announced some gold backed crypto currency.
So, compares to currencies and other markets, gold has its own specific driving factors, that could let it to feel better in the environment of financial crisis and big liquidity problems. That's why we suggest that in nearest 1-2 months, the positive mood should hold here. This agrees with our technical view as pullback from strong weekly support is underway. But, closer to the end of the summer situation could start changing, with higher CPI numbers and US liquidity reserves deterioration.
Gold market has got the same upside impulse from CPI slowdown as other markets this week. And yesterday, we've tried to take a look at 3-6 month perspective, which doesn't look absolutely cloudless, because we have facts that potentially inflationary and our position is a bit different on perspective of CPI dynamic in the future and Fed steps.
But Gold stands a bit separately from other financial markets, because it also has its own driving factors, which could make its dynamic different. BRICS summit in August, massive gold repatriation means that people are preparing to big events.
Market overview
Gold prices eased on Friday but were on track for their biggest weekly gain since April, after signs of slowing U.S. inflation raised expectations of a pause in Federal Reserve's interest rate hikes after this month. Bullion hit its highest since June 16 earlier this week after data showed U.S. consumer prices in June registered their smallest annual increase in over two years, prompting bets the Federal Reserve could soon end its rate-hike cycle.
U.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside. In the 12 months through June, the CPI advanced 3.0%, compared with Reuters estimates of 3.1%.
Meanwhile, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, indicating that the labor market remained tight.
But cushioning the fall in gold prices, the dollar was on track for its biggest weekly decline since November. On Thursday, Fed Governor Christopher Waller said he was not ready to call an all-clear on inflation and favours rate hikes this year - the sentiment reflected in June's FOMC minutes.
On the physical front, Indian dealers offered discounts on physical gold purchases for a third straight week as high domestic prices dented retail demand. The United Arab Emirates removed refinery Emirates Gold from its "good delivery" list certification scheme, the government website showed.
The dollar index (.DXY) fell to its lowest in more than a year, making gold more affordable to overseas buyers, while benchmark U.S. Treasury yields fell, cutting the opportunity cost of holding non-yielding bullion.
India on Wednesday restricted imports on plain gold jewellery, as the world's second-largest consumer of the precious metal tries to plug loopholes in its trade policy.
Import of articles of gold have been put under the restriction category from the free category, a government notification said, adding that import under the India-United Arab Emirates Comprehensive Economic Partnership Agreement would be allowed without any license. The move comes as importers over the last few months have been using a policy flaw to source plain gold jewellery from Indonesia without paying any import taxes.
Inflation is slowing fast enough to allow the Fed to stop tightening U.S. monetary policy after what is still widely expected to be an interest rate hike at its meeting in two weeks time, traders bet on Wednesday. Markets see a 91% chance of a 25-basis point Fed rate hike later this month. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion. Earlier this week, several U.S. central bank officials said that the end to the Fed's current monetary policy tightening cycle is getting close.
Speaking on silver -
Russian Gold Miner Starts $6.3 Billion Buyback Amid LSE Exit. Polyus PJSC plans to spend as much as 579 billion rubles ($6.32 billion) on buying back shares as Russia’s biggest gold miner prepares to delist from the London Stock Exchange. The board approved the repurchase starting Monday of as many as 40.8 million shares at 14,200 rubles a piece, the company said in a statement. The price represents a premium of about 33% to the July 7 closing level.
An increasing number of countries are repatriating gold reserves as protection against the sort of sanctions imposed by the West on Russia, according to an Invesco survey of central bank and sovereign wealth funds published on Monday. The financial market rout last year caused widespread losses for sovereign money managers who are "fundamentally" rethinking their strategies on the belief that higher inflation and geopolitical tensions are here to stay.
Over 85% of the 85 sovereign wealth funds and 57 central banks that took part in the annual Invesco Global Sovereign Asset Management Study believe that inflation will now be higher in the coming decade than in the last. Gold and emerging market bonds are seen as good bets in that environment, but last year's freezing of almost half of Russia's $640 billion of gold and forex reserves by the West also appears to have triggered a shift.
The survey showed a "substantial share" of central banks were concerned by the precedent that had been set. Almost 60% of respondents said it had made gold more attractive, while 68% were keeping reserves at home compared to 50% in 2020.
Rod Ringrow, Invesco's head of official institutions, who oversaw the report, said that is a broadly-held view. "'If it's my gold then I want it in my country' (has) been the mantra we have seen in the last year or so," he said.
Geopolitical concerns, combined with opportunities in emerging markets, are also encouraging some central banks to diversify away from the dollar. A growing 7% believe rising U.S. debt is also a negative for the greenback, although most still see no alternative to it as the world's reserve currency. Those that see China's yuan as a potential contender fell to 18%, from 29% last year.
Nearly 80% of the 142 institutions surveyed see geopolitical tensions as the biggest risk over the next decade, while 83% cited inflation as a concern over the next 12 months. Infrastructure is now seen as the most attractive asset class, particularly those projects involving renewable energy generation. As well as China, Britain and Italy are seen as less attractive, while rising interest rates coupled with work-from-home and online shopping habits which became embedded during the COVID-19 outbreak meant property is now the least attractive private asset.
The Chinese are increasing their gold reserves, and the buildup of gold reserves by various central banks is basically a trend of the last year. It is noteworthy that with the growth of demand for physical gold, the price of gold has been relatively stable for the last 3.5 years and the last year in particular. The answer is simple. For the broad market, gold is a protection against risks. But the emerging holes in the liquidity of investors in the period preceding the acute phase of the crisis have to be closed, including the sale of paper gold. The graph shows that during the recession, the price is either flat or falling, as it was in 2008 (the red line is the export price index), and only then the growth.
FEW GEOPOLITICAL ISSUES
Although a lot of events have happened, as on foreign arena, as on domestic US political arena, we would like you to take a look at couple of them, that seem most interesting to us. Although we could talk a lot about recent NATO summit and decision to prepare Poland and Romania troops to be ready to step-in in conflict at first demand, but this topic was widely observed in the news. As well as increasing of US contingent in Europe. We're interested with a bit different thing.
First, is, our AUKUS block concept is getting the progress, in terms of China confrontation. As the US has started war with Russia by Ukraine hands as they want to burn Japan first, as their closest ally in the region. Washington and Tokyo are making plans to defend Taiwan against a potential attack by China, but Japan won’t commit its military. So they have been working out a plan for a conflict over Taiwan for more than a year, but talks have failed to resolve the main question: Will Japan join the war? According to people familiar with the talks, Washington has been pushing Tokyo to consider allowing the Japanese military to perform functions such as hunting for Chinese submarines near Taiwan, but has received no commitments. Obviously Tokyo is resisting, but does anybody have any doubts that the US will twist their hands and force to go slaughtered instead of the US? Personally I don't.
Here is the concept of wide AUKUS tightening belt around the China to control its access to world ocean and trade ways. It comes from South Korea & Japan, down to Taiwan, then to Phillipines (where US gets four new military bases) and Myanmar (aka Burma) where the US actively support military coup, imposing sanctions. The logic is simple - the only way to get into Indian Ocean by land goes through Myanmar, and its control will not let China to do it. Due to tough China - India relations, they can't get it via India. Also do not forget that Australia and NZ is also near and belong to AUKUS block.
Taiwan is vitally important in this strategy and China also understands this. That's why we suspect that no compromises are possible on this subject. Now it is just decided who first will be thrown in meat grinder. And it seems that Japan will among the first. As a response, China is preparing either and building 2nd missile silo field near north Russian border. As you understand this is not against Russia, because the trust level is unprecedented now between these two countries. But, this is the reason why the US is so hurry with decision of Taiwan question. China now has significantly less amount of nuclear warheads that the US and allies, but plans to increase it for few times to reach 1.5-2K amount by 2030. If they will achieve this, there will no "painless" way to AUKUS to defeat China. Time is ticking.
Second interesting issue, which is at first glance has no relation to geopolitics, but this is only until you not take a look at numbers. This is Goldman Sachs currencies level forecast. A detailed table for clients with rate forecasts up to three years in advance. In a fresh one ("Global FX dated July 7") report, we're particularly interested with the forecast for the ruble, hryvnia and Turkish lira. The three currencies of countries with, let's say, geopolitical and economic difficulties.
Ruble forecast: current price (as of July 07): 93.11, forecast for 3 months: 83.00, forecast for 2026: 92.00 rub/dollar (approximately 2% of the current level in total. Now attention - Lira: current: 26.1 -> 3 months: 28.00 -> for 2026: 31.00 (total ~20% devaluation. And Ukrainian Hryvnia: 36.9 -> 3 months: 36.6 -> for 2026: 57.5 which is total ~55% devaluation. Riddle: what solution of the Ukrainian question is supposed by these figures, from the point of view of American bankers? But don't tell me that this is only Goldman Sachs opinion. Any big whale, such as GS has non official information sources. If you're interested - you could take a look at other ones, including major currencies.
I do not know your thoughts, guys, but now it seems that Ukrainian question could be taken off the table soon, as the US turns to China confrontation. They can't fight on two fronts. Second reason - if even Russia will get the whole Ukraine, it will take a decade or even longer for adoption and doesn't change significantly the force balance in EU region. So they could return back to this question later. Things accurately follow to scenario that we've discussed few months ago. AUKUS are rare mentioned in headlines, but it doesn't mean that work is not going on the back.
BACK TO THE US AFFAIRS
The Federal Reserve got just what it needed – an even cooler-than-expected Consumer Price Index (CPI) report card for June. This could give the central bank a plausible excuse to back off its inflation fight. But make no mistake, inflation isn’t dead or buried.
Stripping out more volatile food and energy prices, core CPI remains in the hot category, but did show some signs of cooling. Month-on-month, core CPI rose 0.2% with an annual increase of 4.8%. Both numbers were slightly below projections. The month-on-month core reading was the lowest of the year. It remains to be seen if this was a trend or an outlier.
Looking at the monthly increases so far in 2023 reveals that core CPI remains sticky, the June number notwithstanding. It rose on a monthly basis by 0.4% in January, 0.5% in February, 0.4% in March, 0.4% in April, 0.4% in May, and 0.2% in June. That averages to 0.38% per month or 4.56% annually – still more than double the Fed’s 2% target.
To put that number into perspective, the annual core CPI increase in June 2022 was 5.9%. If you go by the core CPI, and everybody swears it’s a better price inflation gauge because it is less volatile, then you have to conclude that price inflation hasn’t dropped nearly as much as the headline number indicates. And you will notice that all of these numbers are above the Fed’s 2% inflation target.
Keep in mind, inflation is worse than the government data suggest. This CPI uses a formula that understates the actual rise in prices. Based on the formula used in the 1970s, CPI is closer to double the official numbers. Big drops in energy prices have helped bring the overall CPI down. Broadly speaking, energy prices have dropped by 16.7% year-on-year. Gasoline prices are down 26.5%. Outside of the energy category, the only prices that fell on a monthly basis were used cars and commodities.
The big drop in headline CPI is partially a function of math. A huge 1.2% month-on-month increase from a year ago dropped out of the calculation, bringing the yearly average way down.
Moving forward, the monthly increases dropping out of the calculation will be much smaller, meaning the headline annual numbers will not drop as quickly moving forward. This “big talk-little action” stance is because Jerome Powell and his minions realize high-interest rates will eventually break something in the economy. Even their own economists have warned about a looming catastrophe.
This reveals the ugly reality. The Fed is wedged between a rock and a hard place. It needs to appear to be fighting hot price inflation, but the central bankers also don’t want to wreck the economy. So, they’re talking tough and hoping against hope CPI will cool enough for them to back down. They may have gotten their wish.
This CPI gives them some wiggle room to plausibly back out of the inflation fight. They can say, “Problem solved,” and begin the pivot back to more moderate interest rates. But the problem isn’t solved no matter what the CPI data says. As Peter Schiff pointed out in a tweet, declines in the CPI are weakening the dollar and raising the price of commodities, including oil.
To use Fed terminology, this cooling price inflation is transitory. In reality, the end of the inflation problem means the beginning of a new inflation problem because the Fed hasn’t addressed the root cause – an economy addicted to easy money.
Conclusion:
Now we have some silent period, when tectonic political shifts are become quiet, until new sharp turn happens. The economical factors meantime come on the first stage. And here gold probably joins to other markets. Obviously bullish sentiment should last for some time, at least for two months, when we get next Fed meeting in September. Existence of safety margin in a way of RRP balance and Banking reserves in the Fed, provides time to US Treasury and Fed to postpone some vital decisions. Meantime, the appetite for the cash of the US Government and US Treasury is rising like the snowball - 850 Bln was borrowed in just 6 weeks. This is outstanding pace. Mostly borrowings are financed by RRP balance, but soon this party might be over. We suggest that big shifts might happen in winter. Besides, it is interesting what will happen on BRICS summit in August, when there will be no Fed meeting and when supposedly should be announced some gold backed crypto currency.
So, compares to currencies and other markets, gold has its own specific driving factors, that could let it to feel better in the environment of financial crisis and big liquidity problems. That's why we suggest that in nearest 1-2 months, the positive mood should hold here. This agrees with our technical view as pullback from strong weekly support is underway. But, closer to the end of the summer situation could start changing, with higher CPI numbers and US liquidity reserves deterioration.
