The darkest is over, can gold in July be very good?

As 2022 is over halfway through, the capital market has officially opened the prelude to the second half of the year. Looking back at the trend of gold in the first half of the year, under the pressure of the strong dollar and high interest rate environment offsetting the conflict between Russia and Ukraine, gold has generally weakened. Looking ahead, with the global The tightening expectations of the big central banks are gradually full, and the question left to the world will be how to face the economic recession under stagflation, and gold has the expectation of turning around.

The focus of market transactions in the first half of the year was the continuous strengthening of the Fed’s interest rate hike expectations under high inflation. The US dollar index continued to strengthen and touched a high of 105 twice, which caused him to double-kill US stocks and bonds. Gold prices rose first and then fell. At the end of June, gold closed again. Returning to the level at the beginning of the year, going round and round to return to the starting point, under this strong support, gold is expected to be very peaceful.

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Market recession is expected to gradually rise

As the Federal Reserve started the most aggressive and sharp monetary tightening in history in the first half of the year, the U.S. economic cycle will enter a stage of stagflation from recovery in the second half of the year. Once demand shrinks to put pressure on prices, it will enter a recession. During this process, the market It is expected that the focus on high interest rates will shift to the issue of stagflation, and the switching of market trading logic will also magnify volatility.

Major U.S. fundamental outlook for the second half of the year:

1. Long-term high inflation will erode household income and suppress confidence, leading to a decline in household consumption

2. Fed policy turns to accelerate job market cooling

3. Inflation has fallen slowly, but inflation expectations have not yet gotten out of control;

4. The continued tightening of monetary policy, the contraction of residents, enterprises and government departments will lead to a decline in economic growth, and the recession of economic fundamentals will be bullish for gold.

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Gold pressure weakens after tightening expectations

The Fed’s aggressive interest rate hikes to suppress demand and fight inflation have increased the risk of a hard landing for the economy. Powell has repeatedly mentioned in his recent speeches that the United States does not rule out the risk of a hard landing and economic recession, but also reiterated that the Fed will not give up on tightening and fight inflation. is the only option. As the Fed continues to increase and tighten the amount, it is expected that this round of interest rate hike cycle will not last too long. Once there is more evidence that the risk of economic recession is exposed, the market's expectations for the Fed's monetary policy will be fundamentally reversed.

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From a growth perspective, bond yields may peak, and interest rate support for the U.S. dollar will gradually weaken, while gold will usher in the dawn after it has fully released its bearishness and has been suppressed by a strong dollar and high interest rates. In addition, a factor that cannot be ignored is that the conflict between Russia and Ukraine has not ceased, geopolitical risks still exist, and the process of de-globalization is still going on. Because gold has both the value-preserving effect of physical assets and the hedging properties of credit currency, compared with other Asset, gold is more certain under local turmoil.

Gold begins to build a bottom to fight back

Looking ahead, the economic cycle in the second half of the year will experience stagflation and recession successively. The more aggressive the Fed rate hike cycle, the sooner the rate hike cycle will end. As the risk of a hard landing increases, the Fed has limited room for further hawkishness. , once the Fed's monetary policy turns, gold will likely usher in a new round of retaliatory gains.

In the first half of the year, the U.S. dollar index and U.S. bond yields both hit new highs, which strongly suppressed the price of gold. However, with the economic downturn, the suppression of the U.S. dollar and high interest rates will gradually weaken. In the post-epidemic era, the U.S. economy and There are many problems in people's livelihood, which cannot be completely solved by raising interest rates after the consequences of large-scale fiscal stimulus. The policy problem is not a simple formula of one minus one equals zero. The price of gold is expected to rebound. Back to the bullish trend.