International gold prices continued to fall, and market risk aversion changed rapidly

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China Research Network

Since late April, the international gold price has indeed experienced a sustained decline. The spot price of gold in London reached an all-time high of $2,431.78 an ounce on April 12, but then entered a phase of a volatile correction. By May 3, the price briefly touched $2,277.08 an ounce, a new low since April 5, and the cumulative maximum decline during the period was as high as 6.36%.

The reasons for this change may be multifaceted, including but not limited to changes in the global economic situation, monetary policy expectations, geopolitical risks, and fluctuations in market risk aversion. Changes in the price of gold are often closely related to these macro factors, so when these factors change, the price of gold will fluctuate accordingly.

It is very important for investors and consumers to understand these market dynamics and price changes. However, it is important to note that the gold market is highly complex and uncertain, so it is important to conduct adequate research and analysis and carefully assess your risk tolerance before making any investment decisions.

"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; As of April 30, the net long position in COMEX gold was 204,210 contracts, a decrease of 3,040 contracts from the previous month. As of May 3, SLV silver ETF holdings were 13,189.60 tons, a decrease of 528.92 tons from the previous month; As of April 30, COMEX silver non-commercial net long holdings stood at 54,494 contracts, an increase of 1,347 contracts 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.

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.

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.

A number of industry insiders said that the price of gold has 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.

According to the report written by the China Research Institute of Puhua Research Institute:

Gold is a special class of assets that has commodity attributes similar to commodities, monetary attributes similar to the US dollar, and financial attributes similar to bonds. The relevant person in charge of the National Gold Association said that from the perspective of the product categories of gold jewelry consumption, because the gold price continues to be at a high level, consumers are more inclined to buy light and grammage products, and the increase in sales of products priced by gram weight is significantly higher than that of products priced by piece.

As the spot gold price hit a record high many times during the year, becoming an investment "conspicuous bag", gold jewelry stocks have also become the big winners this year, the company's third quarter performance report collective good news, many companies have refreshed the record high.

China is the world's largest consumer market for gold jewellery and has a huge market size. As a major gold and jewelry province, Guangdong has a complete industrial chain, a large number of enterprises, advanced processing technology, a prosperous trading market, and many jewelry industry clusters above designated size in the province, making it the primary jewelry industry base in China.

According to relevant statistics, there are more than 5,000 registered jewelry enterprises in Guangdong Province, more than 50,000 small and medium-sized merchants and processing households, more than 1 million employees, 350-400 tons of gold, 600-800 tons of silver, 6,000 tons of jade and jade, 50,000 tons of various colored gems and semi-precious stones, the annual output value of the gold jewelry processing industry exceeds 100 billion yuan, accounting for more than 70% of the country, accounting for nearly 30% of the world, and the annual transaction volume of the gold investment market exceeds 100 billion yuan, accounting for most of the national jewelry industry.

There has always been a saying in the industry that "the world's jewelry looks at China, and China's jewelry looks at Shuibei". As a barometer of the gold market, Shuibei accounts for more than 75% of China's gold jewelry market share. According to the data, in the core area of one square kilometer of the market, there are tens of thousands of gold jewelry enterprises.

According to the World Gold Council's Q3 Global Gold Demand Trends Report, global central banks continued to buy gold, providing support for gold demand. According to the data, global central banks bought 337 tonnes of gold in the third quarter, the third highest quarterly net purchase on record. So far this year, global central bank demand has reached 800t, setting a new record since the World Gold Council began to compile such statistics.

Thanks to the sustained and stable growth of residents' income and the increase in safe-haven demand, physical gold investment and consumption continued to grow rapidly. Gold products have dual attributes, not only to meet their pursuit of beauty, but also to save and preserve value. In recent years, a number of gold jewelry brands have also followed the hot spots of consumption and launched younger and personalized gold products, among which Chao Hongji's lily of the valley series gold jewelry is especially popular among young people.

As the consumer population has become younger, the consumption concept of gold jewellery has also changed. The new process design of gold jewelry processing enterprises meets the consumer needs of the "post-90s" and "post-00s" consumer groups for younger and more fashionable products. According to the latest statistics released by the China Gold Association, in the first three quarters of 2023, the national gold consumption was 835.07 tons, of which 552.04 tons were gold jewelry.

In recent years, the gold consumer group in mainland China has gradually become younger, and the gold process is constantly following up with market demand. New processes such as gold jewelry "gold into diamonds" and "3D printing" are constantly innovating. In a gold jewelry processing plant in Shenzhen, a new process can take ordinary gold into a diamond-like visual effect.

Xiao Jingming, head of a gold jewelry processing plant in Shenzhen, Guangdong: Diamonds made of gold give people a new feeling. Through a CNC machine tool, it is more precise, and more than 100 cutting surfaces are required to be turned out of such a small golden table.

The new process of "turning gold into diamonds" makes gold jewelry more diverse and creative, and the current popular 3D printing technology makes it easy to make gold jewelry with complex structures.

The change in the concept of consumption requires the production process of gold jewelry to continue to follow up the market demand, and the processing plants of gold enterprises are also actively introducing automation equipment, carrying out digital upgrades, and innovating and exploring in process technology and intelligent manufacturing.

In the fierce market competition, whether enterprises and investors can make timely and effective market decisions is the key to success. The industry report written by China Research Network makes a specific analysis of the development status, competition pattern and market supply and demand situation of China's industry, and analyzes the opportunities and challenges faced by the industry from the aspects of the industry's policy environment, economic environment, social environment and technical environment.

At the same time, it reveals the potential demand and potential opportunities of the market, provides accurate market intelligence information and scientific decision-making basis for strategic investors to choose the appropriate investment time and the company's leadership to make strategic planning, and also has great reference value for government departments.

If you want to know more about the professional analysis of the industry, you can click to view the report written by the China Research Institute of Puhua Research Institute This report also contains a wealth of data, in-depth analysis, professional methods and value insights, which can help you better understand the trends, risks and opportunities of the industry.

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