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Recently, the gold price has continued to "heat", repeatedly hitting record highs, and in the past two days, the gold price has "braked". On April 22, spot gold in London fell 2.72% to $2326.810 per ounce, the largest single-day decline in nearly two years; COMEX gold futures also fell sharply, closing down 3% at $2,341.1 an ounce; As of 4 p.m. on April 23, London gold spot gold fell to 2308.170 US dollars / ounce, and the domestic spot gold price fell to 544 yuan / gram, down about 23 yuan per gram from the high price of 567.21 yuan / gram on April 12, but it was still at a high level.
In terms of domestic gold prices, the price of branded gold jewellery has ushered in a wave of price reductions due to the impact of international gold prices. A week ago, the gold price of major gold brands generally fluctuated around 730 yuan/gram, and according to the adjustment of the international gold price, most of the gold prices at this stage were around 716 yuan - 722 yuan.
At the same time, due to the decline in gold prices, the recycling price of gold has been adjusted. According to the data of Jintou.com, the gold recycling price on April 23 was 534 yuan/gram, down 8 yuan per gram from yesterday's recycling price, and 22 yuan/gram from the highest recycling price of 556 yuan/gram on April 17. The recycling price of branded gold jewellery has also fallen, with Chow Tai Fook recycling at 520 yuan/gram today and Lao Fengxiang at 531 yuan/gram. Some gold recyclers said that they recovered several kilograms of gold, and they lost more than 100,000 yuan a day.
Zhang Wen, head of the macro and commodity strategy group of the CITIC Futures Research Institute, believes that there are three major reasons for the recent decline in gold prices: first, the weakening of geopolitical risks; second, the liquidity in the early stage was loose and tight; The third is that the bulls take profits, and the overheating mood calms down.
Looking back at the demand for gold market from the "gold price 'brake'":
-- Fluctuations in domestic gold consumption demand
From the perspective of mainland gold consumption demand, the consumption of gold in mainland China fluctuated from 2017 to 2022. In 2018, the country's gold consumption peaked at 1,151.43 tons; Affected by the epidemic in 2020, the annual gold consumption demand fell to 821 tons, the lowest value in recent years. In 2021, it surged by 36.5% year-on-year to 1,121 tons; In 2022, mainland gold consumption fell again to 1,001.74 tonnes; In the first three quarters of 2023, a total of 835.07 tonnes of gold was consumed.
-- The demand for gold jewelry dominates
According to the China Gold Association, gold jewellery is the largest consumer market for gold, with gold consumption in the first three quarters of 2023 being 552.04 tonnes, accounting for 66.11%; Gold consumption in the bar and coin segment was 222.37t, accounting for 26.63%; Gold consumption in the industrial and other sectors was 60.66t, accounting for 7.26%.
According to data from the China Gold Association, the consumption of gold jewelry in mainland China fluctuated from 2019 to 2022. In 2020, China's demand for gold jewellery hit a multi-year low due to the pandemic, a weak economy and high gold prices. In 2021, with the economic recovery and the easing of lockdowns, jewellery demand picked up, with gold jewellery consumption rising to 711.29t that year.
In 2022, although the good epidemic prevention and control at the beginning of the year led to a strong recovery in gold jewelry demand, the subsequent epidemic once again dragged down the demand for gold jewelry; In addition, high gold prices in Q4 also weighed on demand for gold jewellery, with mainland gold jewellery consumption falling to 654.32 tonnes for the full year.
In the first three quarters of 2023, gold jewellery consumption was 552.04 tonnes, up 5.72% year-on-year. In the third quarter of 2023, gold prices continued to be at a high level, and the growth rate of gold jewelry consumption slowed down, especially when the gold price fluctuated sharply near the end of September, and the wait-and-see sentiment of gold jewelry consumption increased.
Xu Ying, chief macro analyst of the Orient Securities Derivatives Research Institute, believes that in the medium and long term, high interest rates and high inflation pose a downside risk to the U.S. economy, the volatility of the financial market is also increasing, the Fed's balance sheet shrinkage is facing adjustments, and monetary policy will eventually enter an easing cycle. Under the trend of de-globalization, the importance of gold allocation is increasing, which forms the basis for gold's long-term rise. In the context of the long-term upward logic has not changed, investors can wait for the better allocation opportunities brought by the pullback.
Zijin Tianfeng Futures said that even if gold prices fell due to the easing of the geopolitical situation, this round of upward momentum brought about by rising inflation expectations has not completely turned. Considering that the market has price-in, the PCE index that will rise slightly on April 26 (note: the US March PCE index, one of the Fed's favorite inflation indicators, is expected to affect the market's expectations for the Fed's interest rate path this year), there is still some room for the upward trend of nominal gold prices.
Note: This article is for content dissemination only and does not constitute any investment advice!
Prospective Economist APP Information Group
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