Spot gold fell below the $2,300 mark intraday

After many days of "soaring", international gold prices have seen a significant pullback. On April 23, London spot gold and COMEX gold continued the previous day's decline, and London spot gold fell below the $2,300 mark intraday. Since April, the international gold price has risen 11 times, and has once again refreshed the historical record, if the observation time window is further enlarged, the international gold price has been in a bull market since late February. Now, the international gold price has fallen sharply for two consecutive days, and even recorded the largest single-day decline in the past two years.

International gold prices "disappointed"

The international gold price, which is like a bamboo, has shown a trend of losing ground for two consecutive days. On April 23, London spot gold and COMEX gold continued the previous day's decline, both falling below the $2,400 mark, hovering around $2,300 per ounce, returning to the highest price level on April 5. As of press time, spot gold in London was at $2299.25 per ounce, down 1.19%; COMEX gold was at $2,312.52 an ounce, down 1.44%.

On the previous day, the international gold price recorded the largest single-day decline since June 2022, with London spot gold and COMEX gold closing down 2.65% and 2.72% respectively at $2327.01 / ounce and $2341.1 / ounce.

In this round of gold price bull market, such a scene can be described as rare, and the international situation has also become a dampening factor for the previous rally. Wu Zewei, a researcher at the Xingtu Financial Research Institute, pointed out that the recent decline in international gold prices is mainly due to the temporary end of the Iran-Israel conflict and the reduction of the risk premium in the Middle East. At the same time, the Fed issued another hawkish warning, and interest rate cut expectations cooled. In addition, after a round of sharp rise in gold prices, the bulls took profits in stages.

Tensions eased into the week as the conflict between Iran and Israel sparked fears of a full-scale war in the Middle East, supported by risk aversion that supported gold prices.

In terms of the market, after the international gold price was setback, the retail side, gold stocks and ETFs were all affected. On April 23, the gold price of domestic pure gold jewelry of a number of gold jewelry brands fell, taking Chow Tai Fook as an example, the company's pure gold (jewelry, handicrafts) on that day was 719 yuan / gram, down 14 yuan per gram from the previous day, and 17 yuan per gram from the previous two days. Also affected by this are the gold sector, gold-themed funds, etc., Laishen Tongling fell more than 9%, Mancaron fell more than 7%, China Gold, Caibai shares fell more than 3%, Huaan Gold ETF, Bosera Gold ETF, E Fund Gold ETF, Cathay Gold ETF all fell more than 2.4%.

Perhaps the price of gold, as the market view says, "rises sharply, rises sharply, and a correction will always come"......

Successive "Hurricanes"

On April 12, London spot gold and COMEX gold both broke through the $2,400 mark, of which London spot gold reached a maximum of $2,431.41 per ounce and COMEX gold reached $2,448.8 per ounce.

If the time window of observation is further enlarged, the international gold price has been in a bull market since late February, and has hit record highs many times in March, rising all the way from the $2,100 mark to the $2,200 mark. Until the beginning of April, the international gold price broke through the $2,300 mark, and on April 12, it continued to hit a record high, standing above the $2,400 mark.

At that time, the "rising tide" of the international gold price brought fire to gold investment and consumption, and the domestic gold jewelry price was updated day by day with the trend of the international gold price, "one price a day, every day witnessing history", which became a true portrayal of the gold consumer market. On the investment side, accumulation funds, gold-themed funds, and gold-linked wealth management products also ushered in the "highlight moment" of yield.

"In the past period of time, the price of gold has actually risen overall", Zeng Gang, director of the Shanghai Finance and Development Laboratory, said that from the perspective of gold supply and demand, the supply side is relatively stable, and the price changes mainly come from the demand side.

Central banks increased their holdings of gold as a reserve asset, which became one of the important factors contributing to the rise in gold prices. According to the World Gold Council, global central banks will buy more than 1,000 tonnes of gold in 2022 and 2023, which is becoming an important part of gold demand, with emerging market countries being the main buyers.

According to the latest data from the central bank of China, the latest data from the People's Bank of China showed that as of the end of March 2024, the mainland's gold reserves were 72.74 million ounces, an increase of 160,000 ounces from 72.58 million ounces at the end of last month. This is also the 17th consecutive month that the People's Bank of China has increased its gold holdings since November 2022.

"Generally speaking, gold prices are mainly related to real interest rates and risk sentiment, but the strength of the traditional analytical framework to explain gold prices has declined significantly, mainly because central banks have vigorously purchased gold, and the emergence of new demand has broken the balance of supply and demand in the past. Wu Zewei said.

Will the price of gold still rise?

In recent years, the logic influencing the pricing of gold prices has changed to a certain extent, and the correlation between gold and the US dollar has weakened with the increase of global geopolitical disturbances and the increase in asset safe-haven demand. Historically, there has been a negative correlation between the price of gold and the US 10-year Treasury yield, but this linkage is now weakening, and since March, the US 10-year Treasury yield has also risen as the price of gold has soared.

A new gold pricing mechanism with central bank purchases as the core variable is gradually emerging. Wu Zewei said that in early May, the Federal Reserve will announce the interest rate decision, followed by the release of non-farm payrolls, which are an important window for investors to observe the Fed's movements and the trend of the U.S. economy. For central banks, the decline is a good time to buy. It should be noted that unlike ordinary investors, central banks do not buy gold just to obtain investment returns, but to ensure the diversification of reserve assets and hedge against geopolitical risks. In this way, the central bank's gold purchase will be maintained, forming a support for gold prices, and it is expected that gold prices will have a large upside in the future.

The rise in gold prices is influenced by a combination of factors, including global economic conditions, changes in monetary policy, and geopolitical events. CITIC Securities Chief Economist Ming Ming believes that although in the short term, the strong performance of the U.S. economic fundamentals, the Federal Reserve's hawkish statement and other bearish views on the already oversoaring gold prices may have a greater impact, but in the medium and long term, the Federal Reserve may be difficult to further tighten monetary policy, the U.S. real interest rate is easy to fall and difficult to rise, and in the international geopolitical environment is more turbulent, the pace of global central bank gold purchases may continue, and gold prices are expected to have some room to rise in the medium and long term.

While gold exists as a safe-haven asset, investment risks remain. Wu Zewei pointed out that in the period of gold price fluctuations, it is more difficult to choose the time. It is best for investors to regard gold as part of their asset portfolio, and before investing in gold, they should clarify their investment objectives and holding period, and choose the investment path that suits them to buy dips.

Beijing Business Daily reporter Li Haiyan