Abstract: China’s PMI has been below 50 for two consecutive months, and the risk of global economic recession has increased; the US dollar may still be favored by the market, and commodity risks and opportunities coexist! LME copper, gold strategic deployment.
China’s PMI has been below 50 for two consecutive months, and the risk of global recession has increased
On Wednesday (November 30), the National Bureau of Statistics of China announced that the Manufacturing Purchasing Managers Index (PMI) in November was 48.0%, a decrease of 1.2 percentage points from the previous month, and was below the 50 threshold for two consecutive months. The level has decreased from the previous month.
In fact, the biggest focus of the current market is the heightened risk of a global economic recession next year. Steven Alan Barnett, chief representative of the International Monetary Fund (IMF) in China, predicts that this year or next year, global output will account for about One-third of economies will have 2 quarters of negative GDP growth, and in terms of growth, downside risks have increased. The IMF earlier predicted that global economic growth would slow to 2.7% in 2023.
Commodity risks and opportunities coexist, but grasping the rhythm is the key to success? Click to get it!
To make matters worse, while the risk of economic recession has increased, global inflation has not seen a significant drop, which means that the world’s major economies are facing the risk of stagflation. The major central banks will still take controlling inflation as the primary goal with a high probability. (Fed’s November meeting minutes members agreed that inflationary pressures have barely slowed; ECB President Lagarde highlighted upside risks to the inflation outlook), which further fueled market fears of a global recession.
The U.S. dollar may still be favored by the market, and commodity risks and opportunities coexist!
The Fed’s November minutes showed that the main reasons for the Fed’s slowdown in raising interest rates include the delayed response of inflation and financial stability. In fact, the U.S. labor market is still “hot” and inflation is still rising, which means the Fed may need to keep its restrictive policy until the end of 2023.
Considering that the gap between US interest rates and European and Japanese interest rates is still widening, and the US needs capital influx to maintain strong economic growth after shrinking its balance sheet, it is expected that the strength of the US dollar will continue in the next few months. Since commodities are denominated in US dollars, it is expected that the rebound space of commodities will be limited when real interest rates remain high.
However, from the People’s Bank of China lowering the deposit reserve ratio by 0.25 percentage points last weekend to release long-term funds of about 500 billion to the “unbundling” of equity financing for real estate companies, a series of policies will support commodity prices.
It is worth noting that after the optimization of China’s epidemic prevention and control, the recovery progress and intensity of consumer demand are expected to exceed expectations. If the consumer demand is released strongly, and the hysteresis effect of monetary easing is superimposed, inflation risks may be triggered. In addition, European and American sanctions against Russia may cause energy prices to rise again, which means that the logic of commodity price increases since 2020 is expected to return.
Gold: mid-term bottom may have appeared
Image source: tradingview
The daily chart shows that gold continued to fall after being blocked at $1786, and at the same time failed to effectively break through the Gann 2/1 line level, implying that the risk of a callback is increasing. If the gold market outlook further penetrates $1,730, the market outlook is expected to further test the $1,700 and $1,680 levels.
But as far as the medium term is concerned, the bottom of gold is gradually approaching. Once gold falls back and stabilizes to form a “double bottom”, there is a chance for gold to rise to the level of 1,850 US dollars in the medium term.
LME Copper: Competing for the $8,000 mark, the market outlook is expected to maintain a low level of consolidation
LMEcopper:
Image source: tradingview
LMEcopper currently around8000The dollar consolidated without forming a clear trend.consideringLMECopper from3It has experienced a sharp decline in the past month, and even if it stops falling in the mid-term, it will still take a longer time to build a bottom, so the bulls should not be too optimistic.
market outlookLMECopper can focus on12The node in the last ten days of the month, ifLMETong followed up and stabilized after repeated adjustments8000Above the dollar mark, it is expected to start a mid-term uptrend.(by Billy)
Follow me on Twitter: @BillyDF5
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