Global central banks continue to buy gold, and the fluctuation of gold price does not hinder the medium and long-term upward trend.

　　Our reporter Gu Mengxuan Xia Xin reports from Guangzhou and Beijing.　

　　Recently, the international gold price hit a record high and was quickly sold off, causing a sharp drop. The price of gold denominated in RMB has also fluctuated greatly, which has aroused widespread concern in the market.　

　　On December 4th, the price of gold futures in new york market once rushed to the $2,150 mark per ounce, with an intraday increase of over 3%, setting a record high. Subsequently, the price of gold quickly fell back, and as of the 7 th, the cumulative correction per ounce exceeded $100.　

　　Affected by this, the gold Au99.99 listed on the Shanghai Gold Exchange fell back after it surged to 487 yuan per gram on the 4th, and the retail price of some domestic brands of gold jewelry stood at the high level of 630 yuan per gram and then fell back to about 615 yuan per gram on the 7th.　

　　According to Wind data, on December 15th, the New York Mercantile Exchange gold futures price was reported at 2018.3 USD/oz; As of press time, the gold Au99.99 listed on the Shanghai Gold Exchange is 472.99 yuan per gram.　

　　Welcome to a loose inflection point　

　　Regarding the correction of gold price, Wang Xiang, fund manager of Bosera Fund Index and Quantitative Investment Department, pointed out that the Fed’s interest rate hike cycle tends to end, which will usher in a loose turning point. Gold benefits from the downward logic of liquidity easing and real interest rate. Historically, similar policy nodes have strong price support power. However, there is a profit-taking impulse near the historical high point, and the net long position of short-term COMEX futures fund is too fast, so there is a need for adjustment.　

　　At 3: 00 am on December 14th, Beijing time, the Federal Reserve issued the statement of the FOMC meeting in December 2023 (the Federal Reserve’s meeting on interest rates), and once again announced the suspension of interest rate hikes.　

　　According to the data provided by Bosera Fund, inflation expectations in the United States have dropped significantly. In December, the consumer confidence index of the University of Michigan rose to 69.4, with an expectation of 62. The inflation expectation dropped significantly, with the one-year inflation expectation dropping from 4.5% to 3.1% and the five-to ten-year inflation expectation dropping from 3.2% to 2.8%. "This combination is not good for precious metals." Wang Xiang said.　

　　As for the rise in the price of gold in the early stage, Bi Mengyu, an investment researcher at Geshang Caifu Jinyu, pointed out that gold, as a non-interest-bearing physical asset, often ushered in rising opportunities when other assets had poor returns.　

　　First of all, from an economic point of view, the global economy is currently in recession. In view of the worries about the economic downturn and the stock market decline, driven by risk aversion, investors are more willing to buy gold to avoid risks, leading to the rise of gold prices. In November, the global manufacturing PMI (Purchasing Managers Index) was 49.3, the US manufacturing PMI was 46.7, and the Eurozone manufacturing PMI was 44.3, all of which were below threshold, reflecting the overall global economic downturn.　

　　Secondly, last week, the ADP data in the United States (an economic indicator commonly used to measure the job market) failed to meet expectations. The market speculated that the Federal Reserve would not raise interest rates in December, that is, the nominal interest rate showed a downward trend with a high probability, which made the price of gold rise again.　

　　Finally, global central banks continue to purchase gold, and the demand for gold purchase by global central banks will remain strong in 2023, which supports the upward trend of the overall price of gold.　

　　"The adjustment of gold this week was mainly due to the rising interest rate of the US dollar index and US debt after the US non-farm payrolls data exceeded expectations, and coupled with the’ hawkish’ signal released by the Federal Reserve Chairman, the price of gold fluctuated downward." Bi Mengyu said.　

　　The annualized compound yield of gold is 7%　

　　The reporter noted that in August this year, the trend of domestic and international gold prices deviated greatly. In recent months, has the excessive price difference between the internal and external markets of gold prices been corrected?　

　　Wang Xiang pointed out that in September this year, the price difference between domestic and foreign countries was the highest, 30 yuan+/gram, and at present, the price difference has largely converged to 7 yuan/gram, but it is still far from the historical 95% confidence fluctuation range of 1.2~1.8 yuan/gram. In the process of convergence, the performance of domestic gold price will be worse than that of dollar gold.　

　　Bi Mengxuan pointed out that the international gold price and the domestic gold price are basically in a positive correlation, but due to the influence of pricing system, rate and time lag, they may deviate in the short term, and the domestic gold price fluctuation is often lagging behind. After several months of adjustment, the international and domestic gold prices have basically converged.　

　　Central banks around the world have also shown sustained enthusiasm for buying gold. According to the data of the World Gold Council, in 2023, the global central bank’s demand for gold purchases remained strong, reaching 387 tons in the first half of the year, a record high in the same period; In the first three quarters, the amount of gold purchased reached a record 800 tons, a year-on-year increase of 14%. At the same time, the data released by the State Administration of Foreign Exchange showed that at the end of November, the gold of the Bank of China had increased for the 13th consecutive month.　

　　In this regard, Bi Mengyu pointed out that the central bank’s allocation of gold mainly considers security, liquidity and return. First of all, gold is regarded as a safe asset and a value-preserving asset by the central bank, because it is more stable in the face of credit risks than other assets such as national debt; Secondly, gold has strong liquidity, and the central bank can quickly enter the market without distorting the price; Finally, although the return is not the main motivation for the central bank to buy gold, the annualized compound rate of return of gold has been around 7% in the past few decades, providing investors with relatively considerable returns.　

　　"The proportion of gold in China’s foreign exchange reserves is still low. Although it has been continuously increased, the current proportion is still less than 6%, which is still far from the proportion of more than 40% in European and American countries." Wang Xiang said that increasing the proportion of gold in foreign exchange reserves will help to diversify the reserve structure and maintain the stability of local currency and asset prices during the contraction cycle of the US dollar.　

　　Rational investment by investors　

　　Regarding the future market of gold assets, Nuoan Fund pointed out that due to the issuance of bonds by the US Treasury, the reduction of US debt holdings by the Federal Reserve and the current strong economic expectations, it is expected that the long-term yield of US debt will remain high, and short-term gold will still be suppressed by interest rates and the US dollar index. However, we expect that the signs of economic slowdown in the United States may be more obvious in the first half of 2024, and high interest rates and recent geopolitical risks may increase the volatility of financial markets compared with the previous period. The logic of gold investment gradually shifts from short-term safe-haven demand to medium-and long-term Fed interest rate cuts. Recently, the market expects the Fed to cut interest rates, which has significantly boosted the price of gold, or it is expected to change more by pricing. It is suggested that investors should actively pay attention to the trend of gold price and consider the proportion of gold allocation to grasp the investment opportunity of gold.　

　　Wang Xiang said that whether inflation converges smoothly, leading European and American monetary policies to shift to liquidity logic, or inflation rises again due to unexpected events, taking stagflation logic, different macro paths are beneficial to the gold margin, making it still one of the assets with high certainty, and the only difference is the difference in odds. Next year is an election year for many economies, and the intensity of geo-game may remain at a high level, which is also conducive to the rise of the price center. The upward target of USD gold is USD 2,200 ~ 2,400, which is about 515~550 yuan/g in China.　

　　"It is normal for the regional fluctuation of gold prices to increase near historical highs. Investors should neither be overly enthusiastic in the overbought state of the market, nor completely lose confidence after their breakthrough failure." Wang Xiang pointed out that in the medium and long term, the easing of the Federal Reserve and the weakening of the US dollar will remain a high probability path next year. With many economies entering the election year, the intensity of geo-game will remain at a high level. After the short-term selling sentiment is released, gold will return to its long-term upward path again.