The price of gold has plummeted, and someone has spent millions to buy 2 kilograms of gold bars, will gold rise back?

National Business Daily

2024-05-09 07:00Published on the official account of Sichuan Daily Economic News

Editor: Zhang Jinhe

Recently, the sharp drop in gold prices has attracted attention, and topics related to "gold prices have fallen to a low point in the past month" and "gold prices have returned to the 5 era" have rushed to the hot search.

According to the China Securities Journal, during the "May Day" holiday, the reporter visited and investigated the gold consumer market and found that due to multiple factors such as the decline in international gold prices and the promotion of the "May Day" holiday, the terminal gold price has fallen significantly. The price of many brands of gold has returned to below 600 yuan/gram after the discount.

The reporter visited and saw that many brands of gold, including Zhou Dasheng and China Gold, are currently quoted back to the "5 era". "The discount per gram during the holiday is 100 yuan, and the discount is 599 yuan/gram, and the cost is calculated separately. During the holiday, in addition to store activities, shopping malls also have preferential activities for gold purchases, and there are more gold buyers during the holidays. The sales staff of Zhou Taisheng's store told a reporter from the China Securities Journal.

In terms of price trends, on April 22, the international gold price ushered in the first sharp drop after five consecutive weeks. On the same day, spot gold in London fell 2.72% to close at $2326.810 per ounce, the biggest one-day decline in nearly two years. Since then, the international gold price has continued to fall more and rise less, and on May 3, the closing price of spot gold in London has approached the 2300 mark. As of press time, London gold is now at $2309.49 an ounce, down 0.24%.

Someone spent a million on 2 kilograms of gold bars during the May Day holiday

According to Chao News, during the May Day holiday just past, some investors in Hangzhou took advantage of the adjustment of gold prices and invested more than 1 million yuan to buy gold bars.

On May 7, Mr. Zhou, the head of a jewelry company in Hangzhou, told reporters that during the May Day period, the price of gold fell significantly, and some customers bought 2 kilograms of gold bars at one time at the relatively low point of the current round of gold prices.

Mr. Zhou introduced that on the night of April 30, the international gold price fell sharply, down more than 2%, and in the early morning of May 1, the domestic basic gold price fell by more than 10 yuan/gram overnight, and the quotation was as low as 539 yuan/gram, which was 27 yuan lower than the high of 566 yuan/gram in April.

"This time the big fall, one of my customers did it, and he called me very excitedly on the night of the 30th, saying that it was finally time to make a big fall. At 10 o'clock the next morning, he came to my store and bought two gold bars, each 1 kilogram, and the selling price was 539.1 yuan/gram that day, and he transferred nearly 1.08 million yuan to me. Mr. Zhou told reporters that in this round of gold surge since March, several customers have specially prepared more than one million funds to invest in gold.

This customer plans to wait until the base gold price stands above 560 yuan/gram to sell a kilogram first, and then sell it after the bullish trend. From the time he bought it to the present, it has risen by 6 yuan/gram in 6 days, and he has made a floating profit of 12,000 yuan. Mr. Zhou told reporters that gold is one of the diversified investments of these customers, and ordinary citizens still have to do what they can according to their family assets.

The central bank continued to take action, and it was rare to "increase 18 times in a row"

According to data released on the official website of the People's Bank of China on May 7, as of the end of April 2024, the gold reserves of the mainland central bank were reported at 72.8 million ounces, up 60,000 ounces from 72.74 million ounces at the end of March.

This is also the first round of gold reserves increased by the central bank since November 2022, and has increased for 18 consecutive months until April 2024, during which a total of 10.16 million ounces have been added. However, the monthly increase in April was only 60,000 ounces, the lowest since the start of the increase in November 2022, and the monthly increase in March was 160,000 ounces.

According to brokerage China, Russia's dollar reserves were frozen after the Russia-Ukraine conflict, which led to questions about the safety of the dollar as a reserve currency. Global central bank demand for gold has been strong since 2022, especially in the Asia-Pacific region. Since 2022, China's gold reserves have increased by 31.4%, Australia by 29.7% and Japan by 12.5%, according to CICC research data.

Goldman Sachs' research report believes that global central bank gold purchases have tripled since mid-2022 to about 10 million ounces per quarter. The increase in global demand for gold since the second half of 2022 has been almost entirely explained by central bank purchases, with six emerging market central banks – China, Poland, Turkey, Singapore, India and Qatar – being the main buyers.

Will the price of gold rise in the future? Can I buy gold now?

According to the Financial Times, the market has different views on the follow-up trend of gold prices, and many institutions suggest that gold faces a greater risk of correction in the short term, but it is still optimistic in the medium and long term.

Xiong Yuan said that historically, gold prices have experienced a significant correction after breaking new highs, starting from a few days after breaking new highs and starting two months after breaking new highs. From the perspective of futures and options positions, the current long-to-short ratio of gold has been higher than the level during the Russia-Ukraine conflict, the Palestinian-Israeli conflict, and the Silicon Valley Bank crisis, which also reflects that long gold trading has been more crowded. In the future, if the bears stop entering the market and the bulls gradually take profits, there may be a "more kill more" decline. However, during the year, fundamental factors are more favorable to gold as a whole, and gold can still be allocated on dips when there is a pullback.

UBS noted in a report released on April 19 that while some investors are concerned that the profit-taking period is too early, market participants may eventually be inclined to sell some of their positions in order to lock in profits given the sharp rise in gold prices. Barring escalating geopolitical risks, gold could enter a period of consolidation.

UBS also pointed out that a healthy pullback in gold prices indicates that the market can form a support base at a higher level. This will help boost investor confidence in gold's long-term bull market.

Talking about the medium and long-term trend of gold, Ming Ming said that although U.S. inflation is highly sticky, it is still in the process of continuous improvement, and in order to maintain the reasonable growth of the labor market, the Federal Reserve is likely to start an interest rate cut cycle this year. After the Fed's interest rate cut cycle begins, US real interest rates may usher in a rapid decline, which in turn will drive gold prices higher. In addition, global central bank gold demand is expected to remain strong for a long time, which will also form a strong support for the gold price pivot.

So, is it too late for the average investor to buy gold, or is it just in time? "Gold, as a traditional safe-haven asset, also needs to be wary of potential volatility risks for short- and medium-term investors." Zhou Maohua said that at present, gold is at a historically high level, and there are still many uncertainties affecting the trend of gold, and there are higher requirements for investors to be professional.

The daily economic news is synthesized from China Securities News, Chao News, the official website of the People's Bank of China, Brokerage China, and the Financial Times

View original image 212K

•