The "hot" gold has cooled down recently.
Since hitting a record high of $2,431.78 per ounce on April 12, the spot price of gold in London has started a shock adjustment mode, hitting $2,277.08 per ounce on May 3, with a cumulative maximum decline of more than 6% during the period. The sudden U-turn in gold prices caught investors off guard when they had previously poured into the gold market. However, as an important weather vane, global central banks continue to buy gold, giving bulls optimistic confidence.
A number of industry insiders interviewed said that the price of gold had risen sharply before, overdrawing part of the market, and in the short term, it may be difficult to directly start the next wave of rising market. However, in the medium to long term, the upward trend has not changed. Operationally, it is recommended to maintain the shock idea in the short term, and the medium and long term can be laid out on dips.
Gold prices fluctuated and retreated
Since late April, international gold prices have continued to fall. Wind data shows that the spot price of gold in London has hit a record high of $2431.78 per ounce on April 12, and then began to fluctuate and adjust, hitting $2277.08 per ounce on May 3, a new low since April 5, with a cumulative maximum decline of 6.36% during the period.
The performance of the spot price of gold in London so far this year
Image source: Wind
On the weekly chart, the spot price of gold in London has fallen for two consecutive weeks. Xu Ying, chief analyst of macro strategy at the Macro Strategy Department of the Orient Securities Derivatives Research Institute, said: "Gold prices continued to fall on a weekly basis, mainly due to signs of easing risks in the geopolitical situation and profit-taking by market bulls. ”
"The rapid adjustment of risk premiums caused by the rapid change in market risk aversion has caused gold and silver prices to pull back sharply after hitting a high in April. Guosen Futures precious metals analyst Wang Meidan said that although the current precious metal prices have entered a stage of shock consolidation, the overall center is still significantly higher than in March.
From the perspective of fund holdings, the bullish power in the precious metals market is also showing signs of fading. As of 3 May, SPDR gold-backed ETF holdings stood at 830.47t, down 1.98t from the previous month, while net long holdings in COMEX gold were 204,210 contracts as of 30 April, down 3,040 contracts from the previous month. As of 3 May, SLV Silver ETF holdings were 13,189.60 tonnes, down 528.92 tonnes from the previous month, and as of 30 April, COMEX silver non-commercial net long holdings were 54,494 contracts, up 1,347 from the previous month.
In terms of the performance of precious metals during the "May Day" holiday, Xia Yingying, an analyst at Nanhua Futures Nonferrous Metals, believes that precious metal prices are sensitive to the Federal Reserve's interest rate decision in the early hours of last Thursday, the U.S. April non-farm payrolls report and crude oil prices on Friday night, but the overall impact is relatively short-lived, and the market's expectations for the Fed's interest rate cut in September have strengthened as a whole.
As of 10:31 Beijing time on May 6, the spot price of gold in London was at $2313.47 per ounce, up 0.50%, and the spot price of silver in London was at $26.93 per ounce, up 1.42%.
Central banks "buy, buy, buy"
Despite the retreat in gold prices, global central banks are still enthusiastic about buying gold.
On 30 April, the World Gold Council released its Q1 2024 Global Gold Demand Trends Report. Total global gold demand (including over-the-counter transactions) rose 3% y-o-y to 1,238t in Q1, the strongest Q1 performance since 2016, according to the report. According to the report, the combination of investment demand from the over-the-counter market, continued gold purchases by global central banks and rising demand from Asian buyers drove the average gold price to a record high in the first quarter.
According to the report, global official gold reserves increased by 290t in Q1, the highest scale of central bank purchases in the first quarter. China's official gold reserves increased by 27t to 2,262t, marking the sixth consecutive quarter. Gold now accounts for 4.6% of the People's Bank of China's total foreign exchange reserves, the highest level in history, helped by surging gold prices.
The report also showed that in the first quarter of 2024, China's overall gold demand reached 343t, more than 25% above the 10-year average. However, in the context of high gold prices, the demand for gold in different sub-sectors has gradually diverged. Bars and coins were the main engine of physical demand growth in Q1, surging 68% y-o-y to 110t, the strongest Q1 performance since 2013.
The industry is optimistic about medium and long-term performance
At present, investors are most concerned about the future investment strategy of gold in the face of increased volatility.
Louise Street, senior market analyst at the World Gold Council, said: "Based on gold's recent performance, gold returns in 2024 are likely to be much higher than we expected at the start of the year. If gold prices level off in the coming months, some price-sensitive buyers are likely to re-enter the market, while investors will continue to view gold as a good safe-haven asset while waiting for the Fed to cut interest rates and the US election results, Louise Street analysis said.
In the short term, Wang Yanqing, an analyst at the Research and Development Department of China Securities Construction Investment Futures, believes that "geopolitical risks tend to ease after a rapid rise, the Federal Reserve is expected to cut interest rates repeatedly, and although there is a pullback after the price of precious metals rises, the pullback is limited, and the negative factors may not be fully reflected." ”
Xu Ying believes: "The economic fundamentals and the Federal Reserve interest rate meeting are relatively bullish for gold, but due to the previous gold price rise, some of the market has been overdrawn, and it is difficult to directly start the next wave of rising market in the short term." ”
However, in the medium and long term, Xia Yingying said that she is bullish on precious metal prices, and short-term prices are still in the adjustment stage, but the pullback is not a reversal, and the decline should be regarded as a layout opportunity.
Xu Ying holds a similar view. She believes that in the short term, many Fed officials will speak one after another, and it is expected to see internal differences on the pace of interest rate cuts. In the medium to long term, the upward trend of gold prices has not changed.
From the perspective of pricing model, Wang Meidan said that gold is gradually transitioning from the traditional pricing model to the new pricing model, and the monetary attributes represented by the central bank's gold purchase are pushing up the gold price pivot, and silver also has a higher price elasticity under its own low inventory. In the short term, it is difficult to say that gold and silver prices will break through the stage of shock consolidation, but the long-term allocation value still exists under the new pricing model.
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