Inflation continues to trigger gold's safe-haven to heat up

The drop in demand for the U.S. dollar has provided support for gold prices, but another rise in U.S. Treasury yields may limit the rebound potential of gold prices. Expectations of the Fed's water collection and recession fears also have a significant impact on gold. The Fed approved a 75 basis point rate hike last week, the largest single rate hike since 1994. The Fed keeps reassuring the world that it can bring down inflation while achieving a soft landing for the economy. But consumer prices have been stuck at unacceptably high levels, and there are every indication that the economy may be heading for a recession over the next 12 months.

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CITIC Construction Investment Futures commented on the precious metal market: precious metals fluctuated within a narrow range during the day, silver stabilized and rebounded more obviously in the afternoon, the US dollar index fell, most of the major market stocks rose during Asian trading hours, and market risk appetite rebounded. After the major central banks have recently started the interest rate hike cycle, the market's worries about recession have gradually deepened, and the global financial market has seen a significant pullback. However, as the market gradually digests the impact of interest rate hikes and the liquidity is still relatively abundant, inflation is still relatively abundant. Properties continue to support precious metals pricing.

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Switzerland imported more than 3 tonnes of gold from Russia in May, the first time since Russia's military campaign against Ukraine in February, according to the Swiss Federal Customs Service, underscoring a possible softening of the industry's attitude towards Russian gold. These imports accounted for about 2% of Switzerland's total gold imports last month. After the Russian-Ukrainian conflict broke out, the London Bullion Market Association removed Russian processors from its approved list, and most refineries stopped accepting Russian gold. Switzerland is home to four large gold refineries, which together process two-thirds of the world's gold.

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In the context of the Russian-Ukrainian conflict, the Russian government and parliament intend to revise the regulations on the sale and management of national precious metals and gemstone stocks. Russia's finance ministry this week proposed placing a portion of the country's gold and precious stones in a special reserve that could be accessed in wartime, according to a government filing website. If passed, the president would have greater power to decide what to do with the reserves. Separately, Russia's State Duma approved new rules last week that would allow the president greater freedom to call on national treasures without consulting the government or parliament. The move will be necessary if the country has to sell assets urgently.

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Qatar's Emir (Head of State) Tamim delivered a speech at the 2nd Qatar Economic Forum held in the capital Doha. He said that the Ukrainian crisis has triggered rising energy and food prices, which will not only restrict global economic recovery, but may also exacerbate humanitarian crises in Yemen, Syria, Ethiopia and other places, putting hundreds of thousands of people at risk of starvation. Tamim said the Ukrainian crisis can only be resolved through a political solution, and the food crisis should not be faced by poor countries alone. Whether these global challenges can be resolved depends on whether countries around the world can strictly abide by the basic norms of international relations, including justice, equality, solidarity and rejection of double standards.

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According to Australia's Department of Industry, Science, Energy and Resources (DISER), global gold supply in 2022 will increase by 2.7% from 2021 to 4,791 tonnes, before falling into 2023. The study found that by 2022, a reduction in the global supply of gold scrap will be offset by an increase in gold mine production. Global gold mine production is expected to increase by 3.7% to 3,692 tonnes in 2022, driven by higher production in Australia, Canada, the United States and Papua New Guinea.

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Gold prices will continue to be well supported for the rest of the year as rising recession and stagflation fears dominate sentiment across financial markets. A 75 basis point move is a huge red flag for many investors that the Fed will push the economy into a recession. In addition to this unprecedented rate hike, the Fed also hinted that it could raise rates by 75 basis points in July and that the federal funds rate could rise to 3.50% by the end of the year and 4% by 2023.

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Commerzbank economists expect gold prices to hold above the $1,800 mark, "in our view, a resumption of recurring buying interest between $1,800 and $1,850 may prevent gold from continuing or Significantly below the $1,800 mark. According to the U.S. Commodity Futures Trading Commission, net long positions fell by 36% to nearly 37,000 contracts in the week ended June 14. In other words, during the reporting period, speculative Sexual financial investors may have played a major role in the fall in gold prices."