Why is the international gold price still bullish on gold?

The international gold price has exceeded $2,040 per ounce. When the tide rises, the enthusiasm for buying gold is also strong. "Gold is suitable for personal use, gifts, and collections, and now more and more people are also buying gold as an investment. A Chow Tai Fook clerk told a reporter from Nandu.

In Shanghai alone, there are more than 400 Chow Tai Fook stores. On the afternoon of December 8th, a reporter from Nandu randomly walked into a Chow Tai Fook located on Nanjing West Road in Shanghai.

The gold jewellery displayed at Chow Tai Fook's counter is dazzling.

How is the Double 12 promotion of the gold store?

It was the first day of Chow Tai Fook's 12.12 offline store promotion. The sales staff of Chow Tai Fook stores told the reporter that in order to cooperate with the Double 12 promotion, the activities of offline stores began on the 8th and lasted until the end of the 12th, and during the activity period, the price of jewelry gold gram weight was reduced by 15 yuan. Taking the price on December 8 as an example, the gold price of pure gold (jewelry, ornaments) on that day was 618 yuan/gram, and the discount price of the event was 603 yuan/gram.

The above-mentioned salesperson said that the gram weight reduction of 15 yuan is already a relatively large preferential activity, "last month's Double 11 promotion was also the strength of this activity." ”

In addition, according to the Nandu reporter's understanding of Chow Tai Fook's online sales channels, taking Chow Tai Fook's Tmall official flagship store as an example, the start date of the event is one day later than offline, from 8 p.m. on December 9 to December 12, the price of some goods can be cross-store, 30 yuan for every 200 yuan.

According to reports, the general gold store sales goods are divided into jewelry gold and investment gold. In addition to the price of jewelry gold, the price of jewelry gold should also be calculated as labor costs, the more exquisite the labor costs, the higher the labor costs, and there are also "fixed price" goods, which are the most delicate and have the highest premium. The price of investment gold is lower than that of jewelry gold, not only there is no labor cost, but the price of gram weight is also cheaper. But the clerk of the gold store told the reporter that the investment money of the gold store will be more expensive than the gold bars sold by the bank, "Those who are willing to buy from us are more trusting us." ”

Chow Tai Fook adjusts the price every day, and the gold price of the day is announced before about 10 o'clock.

"Gold is more expensive now than it used to be, but I would recommend you buy it now. When the reporter from Nandu inquired about buying gold as an ordinary consumer, the clerk of the gold store replied in a tone that was both brisk and affirmative. In her memory, during the Chinese New Year last year, the price of gram gold was about 555 yuan, and now it has been maintained above 600 yuan for more than half a year. "So, it's better to buy late than early. ”

What is the rationale for the "bullish golden"?

But is this really the case? Is it still applicable to the moment when the international gold price has broken through $2,040 per ounce? Or if it is a "bullish gold faction," what is their basis? If it is reasonable, it is not too late to act.

Since the beginning of this year, the international gold price has risen by about 10%. Correspondingly, central banks are also increasing their gold reserves. Taking the People's Bank of China as an example, on December 7, the official reserve assets released by the State Administration of Foreign Exchange showed that as of the end of November 2023, China's gold reserves were reported at 71.58 million ounces, an increase of 380,000 ounces from the previous month, marking the 13th consecutive month of increasing gold reserves.

On the same day (7 December), the World Gold Council released its Gold Outlook 2024. According to the report, the international gold price will perform strongly in 2023, and in 2024, the possible intensification of geopolitical conflicts in some regions and the increase in gold purchases by many central banks will support the future trend of international gold prices.

Everbright Securities research report pointed out that the market expects the Federal Reserve to start cutting interest rates in the second quarter of 2024. Treasury yields will continue to fall in 2024, and the dollar index may weaken, which is positive for gold prices. Both gold and gold stocks had excess returns before the rate cut. Looking back at the two rounds of interest rate cuts in 2007 and 2019, gold prices and gold stocks both rose significantly before the rate cuts.

In addition, the coincident indicator SPDR holdings bottomed out and rebounded, which is good for gold prices. SPDR ETF holdings (one of the world's major gold-backed ETFs) are highly correlated with gold price movements, with SPDR gold-backed ETFs continuing to reduce their holdings since May 2023 and increasing their holdings since 19 October. As of 1 December, SPDR holdings stood at 878.8t, up 30.6t from the low on 19 October.

ICBC International's Cheng Shi team pointed out that gold is still an asset worth allocating in the mild recession quadrant, but special attention should be paid to the fact that gold has historically performed well mainly in the early stage of mild recession, and with the start of the Fed's interest rate cut policy, gold prices may have a certain pullback.

As a result, gold is likely to remain strong in the first half of 2024, but it is likely to peak in the second half of 2024 as interest rate cuts land. In terms of commodities, gold prices may continue to maintain a high trend in the second and third quarters of next year, but if inflation continues to fall and global risk aversion declines, the support for gold prices from interest rate cuts in 2024 may be partially hedged. It is expected that gold prices may peak around the third quarter of 2024. In the long run, the world is still in a cycle of geopolitical turmoil, and the long-term upward trend of gold prices is still there.

Writing/Photography: Nandu reporter Zhao Weijia from Shanghai