Reasons for the continued rise of gold prices?

Reporter Zhou Qi of this magazine

Recently, even the aunts in the community vegetable market have been asking: "I heard that gold has risen again?"

This round of "golden fever" is indeed extraordinary. On September 9, London spot gold prices broke through $3,650 per ounce during the session, setting a record high.

The Chinese people may have no idea about "ounces". Convert to grams, which is almost 830 yuan/gram, up more than 30% from the beginning of the year, which is much higher than the returns of stock trading in the same period.

The biggest driving force behind the recent rise in gold prices is the US "central bank" - the Federal Reserve's expectation that it is "spreading money" to the market is getting higher and higher.

Xinhua News Agency

Data released by the U.S. Bureau of Labor Statistics showed that the number of non-farm employment increased by 22,000 in August. This figure is far lower than the previous estimate of 180,000, which makes the market feel that the US economy is not good.

The weak employment data further strengthened market expectations for the Federal Reserve's interest rate cut. The market is betting that the Fed's interest rate cut in September is close to 100%. Among them, the probability of the Federal Reserve keeping interest rates unchanged in September is 0%, the probability of a 25 basis point cut is 92%, and the probability of a 50 basis point cut is 8%.

What does this mean for gold prices?

If the Federal Reserve starts to cut interest rates, the funds in financial institutions can receive less interest, and some funds will enter the market to find higher returns. More money in the market will cause a certain degree of inflation - money will become worthless. At this time, buying gold becomes more cost-effective.

Ping An Futures Researcher Yang Hong analyzed that gold prices have been setting historical records in recent times, which is the combined effect of short-term positive factors and long-term structural changes, and the direct catalysis in the short term is due to the weak US employment data and the rising expectations of interest rate cuts.

More importantly, the United States is still planning to add a trillion-dollar deficit, which is equivalent to printing more money. If the US dollar becomes "gross", a hard currency like gold will naturally be more valuable.

In fact, central banks of various countries have long started hoarding gold.

The report of the World Gold Council showed that in the second quarter of this year, the global central banks bought a total of 166 tons of gold. In August, gold ETFs also had a net inflow of US$5.5 billion in a single month. The People's Bank of China has increased its holdings for 10 consecutive months and now has 74.02 million ounces of gold, equivalent to more than 2,000 tons.

Another set of data has been flooding the screen on Wall Street.

On September 3, Tavi Costa, partner and macro strategist at the asset management agency Crescat Capital compiled and released data showing that gold's reserve share in the central bank's reserves except the Federal Reserve exceeded U.S. Treasury bonds for the first time since 1996.

The World Gold Council survey showed that 95% of the central banks surveyed planned to continue buying gold in the future.

This is actually the "de-dollarization" of all countries - in the past, everyone used to regard the US dollar as a reserve, but now the US dollar is not trusted, and it is safer to replace it with gold.

The same is true in China, both the people and the country think that gold is more stable. Since the beginning of this year, the scale of 20 gold ETFs has increased by 87.9 billion yuan, totaling 160.5 billion yuan, which has doubled. Many individual and institutional investors are buying gold ETFs to hedge their risk.

Gold is not only the "stabilizing needle" of foreign exchange reserves, but also a "safety card" under geopolitical conflicts.

In the past few days, the situation in the Middle East has become tense again. Israeli air strikes on Gaza, resulting in the breakdown of the ceasefire agreement. Everyone is worried that oil supply will be affected; the conflict between Russia and Ukraine has not stopped, and the scope is still expanding; the United States is still clamoring to impose tariffs on many countries...

The U.S. Treasury Building photographed in Washington, the capital of the United States. Xinhua News Agency

It is not a trivial matter to take them out alone. Adding together makes the market full of anxiety: geopolitical conflicts will lead to rising prices of commodities, especially energy, and rising prices of commodities will lead to inflation and even stagflation. People are afraid that money will depreciate, so they buy gold to maintain their value, which will push up the gold price.

Data shows that the total demand for gold is now rising by 45% year-on-year, which is even stronger than during the 2008 financial crisis, indicating that everyone's confidence in the global order is weakening. Everyone believes that gold seems useless in normal times. When the storm is too strong, it can not only become a hard currency, but sometimes it can save lives.

Can you still buy gold now?

Tell me the views of the organization first. Institutions are generally optimistic about the future of gold.

UBS predicts that it may rise to $3,700/oz. In its latest research report, Morgan Stanley sets its gold target price at $3,800/oz. Goldman Sachs even threatens that gold may reach $5,000/oz in extreme cases.

From the technical point of view, after the gold price has stabilized at $3,600/ounce, the short-term support is very strong, and the Federal Reserve may continue to cut interest rates, central banks are still buying, and geopolitical risks are difficult to eliminate, and gold may continue to rise in the long run.

Xinhua News Agency

Zhu Zhigang, chief gold analyst at Guangdong Gold Association, believes that considering the monetization and risk aversion nature of gold, gold allocation in household investment is "just within the range of 5% to 10%.

In addition, I would like to remind you again, don't borrow money to speculate in gold. To put it bluntly, gold is the "determined sea needle" and "ballast stone", not "stocks" and "lottery".

This round of gold price rise is actually a mirror of the changes in the global economic order. Fluctuations in gold prices are often closely linked to changes in the international order. In the face of uncertainty in the situation, maintaining rationality is more important than chasing ups and selling downs.