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China Research Network
The international gold price continued to rise, and multiple factors jointly drove the strong rise
Recently, the international gold price has shown a strong upward momentum and continues to refresh record highs. COMEX gold futures for June delivery rose again on April 5 to settle at $2,349.1 an ounce, marking another break in gold's all-time closing record. At the same time, the international gold price has risen by more than 14% since March, which has attracted widespread attention in the market.
Market analysts pointed out that the Fed's monetary policy pivot was one of the key factors driving gold prices higher. Against the backdrop of a clear shift in the Fed's monetary policy, the value of gold as a safe-haven asset has been further enhanced. As monetary policy adjustments often affect market interest rates and investor expectations, gold has become a safe haven for investors looking for uncertainty amid uncertainty.
In addition, the intensification of geopolitical conflicts has also had a significant impact on gold prices. Recently, escalating geopolitical tensions around the world have led to a rise in risk aversion in the market, with investors turning to safe assets such as gold. In this context, gold's safe-haven properties have been fully reflected, and prices have risen accordingly.
On the other hand, the continued demand for gold from many central banks around the world also provided strong support for the rise in gold prices. As the global economic situation becomes more complex and volatile, central banks are increasingly focusing on the role of gold in reserves. The increase in gold holdings by central banks has not only increased the demand for gold, but also increased the investment value of gold.
It is worth noting that the prices of pure gold jewelry in some gold jewelry stores have also reached a high level. As the international gold price continues to climb, these stores have also had to adjust their prices to cope with cost pressures. This also reflects the impact of rising gold prices on the real economy.
To sum up, the strong rise in international gold prices is the result of a combination of factors. Gold prices are expected to continue their upward momentum, driven by factors such as the Federal Reserve's monetary policy pivot, intensifying geopolitical conflicts, and continued demand for gold from many central banks around the world. However, while paying attention to the rise in gold prices, investors should also pay attention to market risks, invest rationally, and avoid blindly following the trend.
According to the display released by the China Research Institute of Puhua Industry Research Institute:
The increase in gold holdings by many central banks around the world has a significant supporting effect on gold prices.
First of all, the purchase of gold by many central banks means that the demand for gold in the market has increased. Depending on supply and demand, an increase in demand leads to an increase in prices. As a result, when central banks buy gold, the price of gold usually rises.
Second, central bank holdings of gold are often seen as a long-term, strategic move, indicating central banks' recognition of gold's value and their cautious approach to the future economic environment. Such attitudes are often able to influence the expectations and confidence of market participants, which can further drive the price of gold higher.
In addition, central banks' holdings of gold have also helped to stabilize market sentiment. Against the backdrop of increasing global economic uncertainty, central banks have increased their holdings of gold to enhance their own asset reserves and their ability to respond to risks, which can help ease market tensions and improve market stability. This increased stability has also helped to drive gold prices higher.
It is important to note that the speed and size of central bank holdings of gold in different countries may vary, which will also have different impacts on gold prices. The increase in holdings by some major central banks may be more influential in the market and more supportive of gold prices.
To sum up, the increase in gold holdings by many central banks around the world has a supporting effect on gold prices, which is reflected not only in actual demand, but also in market expectations and sentiment stability. However, the price of gold is also affected by a variety of other factors, such as the global economic situation, monetary policy, geopolitical risks, etc., so investors should consider other factors and make rational investment decisions while paying attention to the central bank's increase in gold holdings.
"This round of rapid rise in gold began in early March, when the US ISM manufacturing PMI was released, the data was significantly lower than expected, and then the Federal Reserve Governor Waller mentioned that he would reduce his holdings of MBS and increase his holdings of Treasury bonds in the future, causing the market to expect that the Federal Reserve will carry out monetary easing in disguise, pushing gold prices to break through. ”
Subsequently, the release of economic data such as the higher unemployment rate in the United States, the expected decline in the PCE price index, and the weaker-than-expected growth in retail sales all validated the fact that the resilience of the US economy has faded. To a certain extent, this strengthened the market's expectations for the Fed to cut interest rates in June, and also brought bullish support to gold prices.
The rapid rise in international gold prices in the short term is mainly due to the expectation of interest rate cuts and safe-haven demand. Drawing on the trend of previous years, before the start of the Fed's interest rate cut, there was speculation in the market about the expectation of interest rate cuts. Persistently high interest rates have put pressure on the U.S. economy, and with inflation under control, the market believes that there is no need for the Fed to maintain such a high policy rate, and the expectation of interest rate cuts is very strong. At the same time, financial risks such as the U.S. banking industry crash occur from time to time, and the demand for safe haven is also an important force to drive the market.
There are three reasons why the international gold price denominated in US dollars continues to rise: first, it is currently in the stage of rising expectations of the Federal Reserve to cut interest rates, and the increase in gold demand is a normal market reaction; Second, since the beginning of the year, many central banks have continued to increase their holdings of gold, the rise of geopolitical risks and the high uncertainty of the global trade environment have made central banks pay more attention to gold reserves, data show that in the past two years, the demand brought by central banks to increase their holdings of gold has accounted for about 25% of the overall market demand; Third, since the Spring Festival this year, the enthusiasm of domestic people to buy gold has been high, in addition to the release of seasonal consumer demand, it is also related to factors such as the increased volatility of the capital market and the prominent investment attributes of gold.
The pace of gold purchases by many central banks around the world continues. According to data from the People's Bank of China, as of the end of February this year, China's gold reserves were 72.58 million ounces, an increase of 390,000 ounces from the previous month, which is the 16th consecutive month that the central bank has increased its gold reserves. According to data from the World Gold Council, global official gold reserves increased by 39t in January 2024, with central banks including Turkey, India, Kazakhstan and Jordan all adding gold reserves.
"The purpose of many central banks to increase their holdings of gold is to diversify their reserves and change the composition of the dollar's dominance. "Based on the needs of long-term construction, the financial products of the central bank's reserves need to meet the dual requirements of safety and liquidity, coupled with the transparency and standardization of the price and trading of gold, the central bank will take gold as an important part of the central reserves.
Market participants generally believe that at present, the Federal Reserve has changed from an interest rate hike cycle to an interest rate cut cycle this year has been regarded as a definitive event, and the market's willingness to be bullish on gold is relatively strong, and at the same time, under the influence of geopolitical risk aversion and other factors, the international gold price may be in a state of high operation.
Judging from the logic of maintaining the operation of this round of gold prices, the overall upward trend of international gold prices may continue to be maintained, and the adjustment range in the second quarter of this year may be limited. There is a possibility of cyclical weakening of the U.S. economy, and it is difficult for real yields on U.S. bonds to remain high.
In addition, the current world political and economic situation is becoming increasingly complex, geopolitical turmoil is intensifying, especially the escalation of tensions in the Middle East, the price of oil and other commodities has risen significantly, and the global economic environment is facing more uncertainties.
"Before the Federal Reserve cuts interest rates, international gold prices do not rule out the possibility of hitting new highs. "Considering that inflation in the United States and Europe may fall further this year, gold's anti-inflation attribute will weaken, or it may have a certain inhibitory effect on the rise of gold prices. If the Federal Reserve starts to cut interest rates around the middle of the year, the upward momentum of international gold prices will also slow down under the expected fulfillment effect.
Statistics from the China Gold Association show that in the first three quarters of 2023, the domestic raw gold output will be 271.248 tons, an increase of 1.261 tons compared with the same period in 2022, a year-on-year increase of 0.47%, of which 214.866 tons of gold from gold minerals and 56.382 tons of non-ferrous by-product gold will be completed. In addition, in the first three quarters of 2023, the gold output of imported raw materials was 96.277 tons, a year-on-year increase of 11.48%, and if this part of the imported raw materials was added, the country produced a total of 367.525 tons of gold, a year-on-year increase of 3.14%.
In the first three quarters, the national gold consumption was 835.07 tons, an increase of 7.32% compared to the same period in 2022. Among them: 552.04 tons of gold jewelry, a year-on-year increase of 5.72%; 222.37 tonnes of gold bars and coins, up 15.98% year-on-year; industrial and other gold was 60.66 tons, down 5.53% year-on-year.
In terms of gold prices, which investors are more concerned about, in the first three quarters, the downward pressure on the global economy continued to accumulate, geopolitical conflicts continued, and international gold prices fluctuated at high levels. At the end of September, as the market's expectations for the Fed to maintain high interest rates increased, the international gold price retreated sharply to the level at the beginning of the year, but remained at a historical high. At the end of September, the London spot gold fixing price was $1,870.50 per ounce, up 1.48% from the beginning of the year; Shanghai Gold Exchange Au9999 gold closed at 447.10 yuan / gram at the end of September, up 8.78% from the beginning of the year.
Recently, as international gold futures and spot prices hit a record high, domestic gold consumption has also been rising. New York gold futures soared to $2,152.3 per ounce, London spot gold hit an intraday high of $2,144.68 per ounce, and the price of some domestic brand gold jewellery was as high as 630 yuan per gram.
The rise in gold prices is affected by the Federal Reserve's monetary policy, the trend of the US dollar and other factors. According to the World Gold Council, global central banks bought around 800 tonnes of gold in the first three quarters, an increase of 14% compared to the same period last year, which was also one of the factors driving gold prices higher.
According to the report "Insights into the Gold Investment Needs of China's High-net-worth Individuals" released by the World Gold Council, "value preservation" and "safety" have become the primary goals of wealth management for high-net-worth individuals in mainland China. "For investors who have already allocated to gold, the potential future appreciation of gold, portfolio diversification and safe-haven functions are the top three factors driving their purchases. ”
Looking ahead to 2024, the World Gold Council believes that 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.
As for the distribution trend of reserve assets in the next five years, most of the central banks interviewed at the forum believe that US dollar assets will decline, and the proportion of assets such as RMB and gold will increase.
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