European Natural Resources Fund: If the U.S. economy declines in the second half of the year, caution is needed regarding falling gold prices
Li Gangfeng, an analyst at the European Natural Resources Fund, pointed out that if the U.S. economy confirms a recession in the second half of the year, it is necessary to be wary of gold prices potentially falling along with other asset prices. The current important support level for gold prices is $3,200, with the next support level at $3,000. Although the increase in market risk appetite has led to a decline in gold prices, global geopolitical risks still exist. Li Gangfeng also mentioned that the U.S. sovereign rating has been downgraded, and market expectations for the Federal Reserve to cut interest rates have become conservative
According to the Zhitong Finance APP, Li Gangfeng, a special analyst for the European Natural Resources Fund, stated that with the successful conclusion of Sino-U.S. trade negotiations (temporarily maintained for 90 days), the market's risk appetite has increased, leading to a decline in gold prices. However, global geopolitical risks have not been alleviated. Currently, $3,200 is an important support level for gold prices, and the next most important support level is $3,000. Additionally, caution is advised regarding whether gold prices will follow other asset prices down if the U.S. economy confirms a recession in the second half of this year (but not stagflation).
Li Gangfeng noted that after the downgrade of the U.S. sovereign rating, U.S. bond auctions have been lackluster, and bond yields continue to rise (prices are falling). In previous situations, if the U.S. economy were to enter a recession, U.S. stocks would decline, but the U.S. dollar and U.S. bonds would benefit from an influx of funds and rise (this is also a reason for being cautious about gold prices, as a U.S. economic recession would lead to a strong U.S. dollar); however, due to the recent phenomenon of simultaneous declines in U.S. stocks, bonds, and the dollar, previous investment wisdom may have changed, so everyone should be prepared for both scenarios. Nevertheless, under the current circumstances, gold prices remain strong.
He also mentioned that the market's expectation of the Federal Reserve lowering interest rates in July has dropped from 76.4% four weeks ago to 25.2% last Friday. The probability of maintaining the September interest rate unchanged has also risen from 6.2% to 43.8%. The market has become more conservative regarding the extent of interest rate cuts in the U.S. this year, as signs of recession have emerged amid various upheavals in the U.S. economy, yet interest rates have not been cut. The rating agency Moody's downgraded the U.S. sovereign rating from the highest Aaa to Aa1, and changed the outlook from stable to negative, mainly due to high interest rate costs and the unsustainable rapid growth of U.S. debt.
