Since January, with US stocks falling, geopolitical tensions rising and cryptocurrency turmoil, investors are flocking back to safe havens such as gold, and international gold prices have continued their rise since mid-December.
In the domestic market, A shares fell unilaterally after opening low on Tuesday, with all three major indexes falling more than 2%. The Prev index lost 3500 points, and the gem index fell below the 3000-point integer mark in intraday trading. The decline widened near the end of the day. As of the close, only precious metals and airport sectors closed higher. The vast majority of ETF in the two cities also fell, and gold ETF played an important role in the few ETF that closed higher.
Looking to the future of gold prices, the World Gold Council believes that the side effects of the extremely loose monetary and fiscal policies of the world's central banks after the outbreak, the disruption of the supply chain, and the tightening of the labor market are likely to lead to a sustained rise in global inflation. Coupled with the overvaluation of stock markets in major markets, possible new variants, and investors' increased allocation of illiquid assets, these may also lead to more frequent market adjustments. this has increased the demand for gold as a portfolio risk hedging tool. Relatively aggressive gold consumption and global central bank demand will also support gold's performance, which are also clearly long-term key factors affecting the performance of gold prices.
Multiple factors stimulate gold price
Since the beginning of this week, the global market has suffered a common shock, the double whammy of stocks and bonds, and the sudden cold of the market. Under the combined influence of market risk aversion and geopolitical factors, the international gold price has become the biggest "beneficiary". As of Beijing time, February gold futures were above US $1840 / oz.
In addition to the concerns caused by the Fed's interest rate debate, the series of prices were also affected by the escalation of geopolitical factors. On January 24, local time, panic in European markets soared and major stock indexes opened lower. Russian stock markets and foreign exchange markets, in particular, have weakened sharply.
Guangfa Futures believes that the Fed's vigorous efforts to curb high inflation does not rule out raising interest rates in March, and the contraction table in the middle of the year may also rise further, thus pushing up US debt interest rates. Consumption of precious metals will be supported by demand for important festivals in China and India at the beginning of the year. In addition, the impact of the geopolitical situation is unpredictable, and the risk of short-term volatility in gold and silver prices will rise under the resonance with expectations of further monetary tightening by central banks around the world. Gold may rebound further in the short term if there is no further hawkish signal at the Fed meeting in January.
However, even if the Fed prepares to tighten monetary policy, which could deal a blow to the attractiveness of gold, falling stock markets, geopolitical factors and the collapse of Bitcoin will also stimulate safe-haven demand.
On Friday, the world's largest gold ETF--SPDR Gold Shares had a net inflow of $1.63 billion, the largest one-day net inflow since it went public in 2004. Net inflows by tonnage on Friday were 27.6 tonnes, bringing total positions back above 1000 tonnes to 1008.45 tonnes. While domestic investors continue to enter the market at low prices, the total size of China's gold ETF continues to rise in December, and as of December 16, its total position has exceeded 80 tons, the highest in history.
Earlier, Guoxin Futures said that according to the shrinking table expectations provided in the minutes of the previous Fed meeting, market expectations for the pace of tightening of the Fed's monetary policy were further accelerated, and this Fed meeting is expected to start shrinking at some point after raising interest rates, more hawkish than at the time of the decision. Us bond interest rates quickly rose above 1.7 per cent, and real interest rates rose sharply to 32bp within a week. Market expectations of raising interest rates have been increasing, and since the Federal Reserve meeting in December, the probability of raising interest rates once in March has risen from 50% to 70%. The probability of raising interest rates once in June has risen from 85% to 94%.
The value of risk aversion is prominent.
Prior to this, Wang Yanjie, general manager of CIC UBS, said that the performance of gold prices in the past period of time was not particularly outstanding, which was related to the market environment or the atmosphere of market investment. in fact, these repressive factors have gradually turned into factors supporting gold prices, including demand for pressure on US Treasuries. The market views on the impact of this wave of inflation on gold prices tend to be consistent, that is, gold prices have better performance opportunities. Gold is a very good risk aversion tool, whether from a risk diversification point of view, or from a return point of view, it is necessary to include gold in the portfolio.
In the recent disclosure of the Fund Quarterly report, for the future of gold prices, fund managers as a whole also maintained relative optimism, and said that investors should add gold to their portfolios.
Among them, according to the four Seasons report of Huaan Gold ETF, fund manager Xu Zhiyan believes that looking forward to the first quarter, the slope of the global economic recovery may further slow, the inflation center will effectively improve, and the monetary policy of the central banks of Europe and the United States is expected to contract moderately. At the economic level, the spread of novel coronavirus variants forced many countries to tighten their open policies, and there is still great uncertainty about the speed of economic recovery. Secondly, with the large-scale fiscal stimulus and the ebb of monetary easing in Europe and the United States in 2022, major economies will rely more on self-repair after the epidemic, superimposing the base effect, and the economic momentum will obviously weaken. In terms of inflation, inflation for the whole year is expected to be high before and low after, the inflation center is significantly higher than before the epidemic, the problem of global supply chain disorder is more difficult to solve in a short period of time, high inflation is expected to remain for a long time, generally good for gold. On the policy side, Taper has completely landed, and the number of interest rate increases in 2022 has been fully expected by the market. At present, the core of the market game is to raise interest rates. Judging from the trend of gold during the last round of Fed interest rate hikes, gold prices are under pressure during the expected period of interest rate increases, but gold tends to be strong after interest rate increases. Overall, high inflation, a slower slope of economic recovery and the landing of monetary policy will be the core factors driving the gold market in the first quarter.
Ai Xiaojun, ETF of Cathay Pacific Gold, believes that with the Fed gradually expanding the scale of bond purchases and the landing of interest rate increases, gold is expected to rebound after interest rate increases due to the impact of persistently high inflation. But in the medium to long term, the prospects for the global epidemic and economic recovery remain uncertain, and gold may continue to play a safe-haven role in the portfolio. In the face of frequent global risk events and the continuing risk of recession, central banks, including the Federal Reserve, continue to release liquidity to maintain the economy, and the safe-haven value of gold may be highlighted. Adding gold to the portfolio can effectively reduce portfolio volatility.
