Gold prices surged to 502.56 yuan/g and Wall Street is bullish! [SMM Hot Topics]

After COMEX gold hit a high of US$2,150.5 per ounce on March 5, it experienced a slight shock correction on the 6th; SHFE gold has frequently set new historical highs recently! The most active contract of SHFE gold rose to an intraday high of 502.56 yuan/gram on the 6th, setting a new historical high again! As of the close on the 6th, the most active contract of SHFE gold was quoted at 500.70 yuan/gram, an increase of 1.05%. Recently, the price of gold has been soaring, and COMEX gold has regained $2,100 per ounce. On March 5, it was once close to its high of $2,152.3 per ounce on November 2, 2023. Why is the price gain of gold so rapid? Some Wall Street institutions believe that it may soar to as high as $3,000 per ounce! Let’s see how major institutions analyze the gold price outlook.

News front

[Recent U.S. data have performed poorly and expectations for a rate cut by the Federal Reserve in June have increased] U.S. service sector growth slowed slightly in February due to a decrease in employment and new orders. The Institute for Supply Management (ISM) said on Tuesday that its non-manufacturing PMI fell to 52.6 last month from 53.4 in January. Benchmark U.S. 10-year Treasury yields hovered near one-month lows, making gold more attractive. Money market pricing showed traders were pricing in a 71% chance the Fed would begin cutting interest rates in June, up from 65% on Tuesday morning, according to the Rate Probability app. Data released last week showed that the U.S. manufacturing industry declined further in February, inflation gradually eased, and consumer confidence remained weak, raising market expectations for an interest rate cut by the Federal Reserve in June. The U.S. dollar weakened, which is conducive to rising gold prices.

[New York Community Bank previously suffered a new round of credit rating downgrades] According to news on March 5, the downgrades of New York Community Bank by two institutions may increase the borrowing costs of the troubled bank. Fitch downgraded New York Community Bank's rating to non-investment grade, and Moody's Investors Service, which already rated the bank as junk, further downgraded the bank's rating. Shares of New York Community Bank tumbled Friday after the bank disclosed it had replaced its chief executive after discovering "significant flaws" in the way it tracked loan risk. The downgrade puts "pressure on their cost of capital," Wedbush Securities Inc. analyst David Chiaverini said in an interview. It rated the bank as underperform the industry. New York Community Bank recently said that its disclosure of "significant flaws" in the way it tracks risk does not require it to set aside more loan loss reserves. “Our credit loss provisions take into account these deficiencies and do not expect to adjust,” Alessandro DiNello, who succeeded Thomas Cangemi as CEO this week, said in a statement on Friday. “The company has good liquidity and a solid deposit base, and I believe we We will execute our turnaround plan to enhance shareholder value." On March 2, Moody's once again downgraded New York Community Bank's long-term rating from Ba2 to B3 and may further downgrade it. Moody's downgraded its rating to junk status in early February. Earlier, Fitch downgraded New York Community Bank to junk status. Fitch downgraded New York Community Bank (NYCB) to junk status with a negative outlook.

[The U.S. White House said the Treasury Department is paying attention to New York community banks] On March 1, local time, White House Press Secretary Karina Jean-Pierre said that the banking system, including regional banks, remains solid, resilient and liquid. Abundant. Jean-Pierre told a news conference that the Treasury Department and regulators continue to monitor developments at New York community banks.

Spot gold prices rose

As the price of gold rises, the retail gold price of pure gold jewelry announced by domestic gold jewelry brands on March 6 exceeded 650 yuan/gram. The strengthening of gold prices has also led to the rise of precious metals such as silver. According to SMM, premium for large-volume order national standard silver ingots in Shanghai was 0 -2 yuan/kg on March 6, and the quotation of spot silver ingots from large producers was 3-4 yuan/kg with cash payment. Consumption was weak.

SPDR Gold Trust, the world's largest gold exchange-traded fund (ETF), announced that as of Tuesday (March 5), its gold holdings were 821.47 tons, unchanged from the previous trading day. In ounces, the open interest is 26,411,077.55 ounces.

Data previously released by the World Gold Council shows that in January, gold outflows from the SHFE gold Exchange (SGE) reached 271 tons, the highest ever January outflows, and gold jewelers were actively replenishing goods before the Spring Festival holiday. That's the main reason. In January, the inflow of gold ETFs in the Chinese market was approximately 827 million yuan (US$113 million), and its total assets under management (AUM) hit a record high. In January, the People's Bank of China (PBoC) announced the purchase of gold for the fifteenth consecutive month, and the total gold reserves increased by another 10 tons to 2,245 tons. The World Gold Council's future outlook for China's gold market is: Domestic gold demand tends to be boosted during the Spring Festival. Gold consumption during the Spring Festival in 2023 will be affected by the COVID-19 epidemic, while sales during the Spring Festival holiday in 2024 may achieve strong year-on-year growth. But after January, as the replenishment boom cools down, upstream physical gold demand may decline. At the same time, continued demand for hedging and hedging may continue to push investors toward physical gold investments, further boosting gold demand at the beginning of the Year of the Dragon.

[The retail price of gold in Japan has repeatedly hit new highs and some Japanese consumers are turning to silver investment] According to foreign media sources, the domestic retail price of gold in Japan reached a new high on March 4, setting off a "gold buying craze". It is reported that rising international gold prices and the depreciation of the yen have driven up Japanese gold prices. Some industry analysts in Japan believe that gold prices are likely to rise further in the future. In addition, due to the high price of gold, investing in gold requires a large amount of money. Many Japanese consumers have also begun to pay attention to relatively cheap silver and related products, such as necklaces, rings and other silver jewelry.

Data from the International Monetary Fund (IMF) shows that in January 2024, India's gold holdings increased by 7.812 tons to 811.417 tons.

According to data from the World Gold Council (WGC), North American gold ETF outflows this year were 36.2 tons in the week ended February 23. In comparison, Europe had outflows of 17.1 tons and Asia had inflows of 3.1 tons.

Wall Street is still generally bullish on Citigroup, and is even bullish on $3,000.

[Citi: Gold prices may even reach $3,000 per ounce in the next 12 to 16 months] Citi Research said on Tuesday: “We will raise our gold benchmark price targets for 0-3 months and 6-12 months respectively. to $2,200 per ounce and $2,300 per ounce." Citi Research expects a consolidation in gold prices “to materialize as early as this week, if not then certainly before the March FOMC meeting.” In a report on Monday, Citi analysts called themselves "bullish on gold in the medium term" and predicted that there is a 25% chance that gold prices will reach a record $2,300 per ounce in the second half of this year. However, their base case for gold prices remains at $2,150 and reiterated that gold prices could even reach $3,000 an ounce over the next 12 to 16 months. Citi sees gold as a "recession hedge" in developed markets and increasingly sees upside from uncertainty about the U.S. election in November.

[ING: The Fed’s policy will remain a key factor in the outlook for gold prices in the coming months] ING strategists said on Tuesday: “We believe the Fed’s policy will remain a key factor in the outlook for gold prices in the coming months. factors, gold prices are expected to remain volatile in the coming months as markets also react to macro drivers and geopolitical events."

[Capital Economics: Gold prices are likely to rise as the dollar weakens over the next two years] Kieran Tompkins, commodities economist at Capital Economics, reiterated his bullish stance on gold as the Federal Reserve prepares to embark on a new round of loose monetary policy . Tompkins said he expects gold to end the year around $2,100 an ounce and rise to $2,150 an ounce by the end of 2025. However, gold prices have exceeded Capital Economics' year-end target. “In short, we currently expect the Fed to cut interest rates by 200 basis points by the end of 2025, starting in June. Accordingly, we expect the U.S. 10-year bond yield to fall to 4.0% from the current 4.25% by the end of this year. " He also believes gold prices are likely to move higher as the U.S. dollar weakens over the next two years. The key for gold remains investor demand, and the British research firm believes gold-backed exchange-traded funds (ETFs) will see inflows again.

[National Australia Bank: Central bank gold purchases will continue to drive gold price gains] National Australia Bank analysis said that given that gold is regarded as a tool to hedge against inflation, the downward trend in global inflation since the end of 2022 and the recent stock market rise will usually seen as negative pressure on gold prices. However, gold purchases by multiple central banks exceeded 1,000 tons in 2022 and 2023, while consumer demand has been strong in some regions. It is predicted that by 2024, the price of gold will rise from around US$1,942 in 2023 to US$2,025 on average.

[Berenberg Bank: If Trump wins the U.S. election this year, it will provide "significant positives" for gold] Analysts at Berenberg Bank also pointed out on Monday that if Trump wins the U.S. election this year, , will provide "significant benefits" to gold. The market volatility caused by the Russia-Ukraine conflict and the Palestinian-Israeli conflict will further support gold, a safe-haven asset. As a result, they believe gold-linked stocks will see upward momentum. They noted that these stocks have recently become "decoupled from the underlying commodity" despite recent near-record gold prices. They believe: "This is mainly due to the fact that the U.S. economic performance is better than expected, which makes the Federal Reserve still maintain a tough stance on monetary policy."

[McIntyre: The gold market has not peaked in the long term] Ryan McIntyre, managing partner of Sprott Inc., said that regardless of whether gold’s gains for several consecutive days can be sustained, in the long term, gold prices will continue to rise. While some analysts are warning investors that the gold market is somewhat overbought and could see a pullback before the end of the week, McIntyre said investors should ignore short-term price action and focus on the bigger picture. "Long-term, this is not the top of the market," he said. Gold prices began to rebound in earnest on Friday after disappointing manufacturing data. He said recession concerns are expected to continue to intensify, further boosting safe-haven demand for gold. " It’s no surprise that the gold market is finally starting to gain some significant bullish momentum. He added that while investors have been shying away from gold for much of 2023, central banks have made up the difference. Despite higher bond yields and a relatively stronger dollar, gold spent much of the new year above $2,000 an ounce, driven by central bank demand. Despite higher prices, he expects central banks to continue buying gold. "My bet is that central banks will not relax their gold purchases because in an increasingly divided and uncertain world, holding other countries' currencies makes less and less sense." "Investors are starting to recognize this trend, and I think we'll start to see new money flowing back into ETFs, which could be a secondary force driving prices higher." Like central banks, investors will look to gold as a stand-alone risk hedge as the global economy weakens, McIntyre said.

[Bank of America: U.S. debt increases by $1 trillion every 100 days, which is good for assets such as gold] Bank of America strategists say that U.S. government debt increases by $1 trillion every 100 days, which helps explain why assets such as gold and Bitcoin Prices are near all-time highs. The pace of debt inflation is also accelerating, strategists led by Michael Hartnett said in a note on Friday. They estimate that it would take just 95 days to go from $34 trillion to $35 trillion. The consequence for markets, BofA said, is that trades tied to "bond depreciation" are proving attractive as gold and Bitcoin have risen recently.

In addition, the analysis of gold by domestic institutions is as follows:

[CITIC Securities: Gold prices hit new highs and the attractiveness of the gold sector is expected to pick up] CITIC Securities research report stated that the U.S. economic data declined more than expected, and the Federal Reserve’s expectations for an interest rate cut within the year have once again been strengthened. The resurgence of the NYCB crisis has led to market concerns about the U.S. banking industry and the commercial real estate industry. Concerns intensified, and gold prices both at home and abroad hit record highs. We believe that the current gold sector is still at a low level, and subsequent increases in gold prices and improved performance are expected to boost the sector's attractiveness and resume its rally. Maintain the "outperform" rating for the gold industry.

[Tianfeng Securities: Optimistic about gold price reaching new record high] Tianfeng Securities research report believes that looking forward to the gold market in 2024, both financial and hedging attributes are conducive to the rise of gold prices, and the current valuation level is relatively reasonable. We are optimistic that gold prices will reach a new all-time high. The biggest variable for gold in the future may be contained in the most important proposition of the new era: "Can the development of artificial intelligence improve total factor productivity and thereby solve the current situation of insufficient supply?"

The Jinyuan Futures Research Report believes that the current market has once again taken advantage of the "easy trading" logic. We believe that we need to be wary of the risk of a short-term high correction in gold prices. Focus on the release of U.S. non-farm employment data for February this Friday, which may provide more guidance on the path of subsequent interest rate cuts.

Guosen Futures believes: Looking ahead to the market outlook, current inflation concerns have eased, and the market's expectation for an interest rate cut may be stable in June in the short term. Before the release of non-agricultural data, gold and silver are expected to continue to fluctuate and be stronger, and the operation suggestions are more volatile and bullish. treatment, focusing on the release of non-agricultural data.

[Gold hits a new high with strong easing expectations] CITIC Futures believes that weak economic data in the United States and the Federal Reserve may take easing measures in disguise to stimulate the rise of precious metals. This round of surge began at 11 pm on March 1, Beijing time. At that time, the U.S. ISM manufacturing PMI was released, and the data was significantly lower than expected. Subsequently, Fed Governor Waller mentioned the "reverse reversal operation" and prepared to reduce his MBS holdings. At the same time, the increase in holdings of government bonds has aroused market expectations that the Federal Reserve will carry out monetary easing in disguise, and precious metals have risen sharply. In addition, market demand for safe havens continues unabated. Concerns about a "thunderstorm" in the U.S. banking industry have recently resurfaced. The stock prices of New York community banks fell by more than 40% in the first two trading days of March, driving the stocks of other regional banks lower and driving risk aversion in the market to a certain extent. Overall, the U.S. economy has an obvious weakening trend, and monetary policy is gradually shifting from tightening to loosening. Precious metals will still be easy to rise but difficult to fall in the future. CITIC Futures believes that short-term positive factors are accumulating, but the rapid rise may not be sustainable. Precious metals tend to fluctuate at high levels in the short term, but the long-term bull market is still worth looking forward to. The short-term strategy considers selling put options, while the long-term strategy considers placing long futures orders on dips.

Although the price of gold has soared, some analysts believe that there is no "gold rush" among Western investors.

Adrian Ash, head of research at Bullion Vault, said gold’s recent record highs were due to “a surge in speculative bets. There is no 'gold rush' among Western investors at the moment , either for physical gold or for futures and options outside of the Comex. Gold exchange-traded funds (ETFs) continue to "shrink to pre-pandemic sizes, and coin shops are slashing premiums and buyback prices to try to handle the massive selling by customers." Since gold has no earnings, these new all-time highs may be "vulnerable to central bankers." This may be because the Fed is keeping interest rates higher for longer to keep inflation in check. Ash said that even so, "there is no guarantee that gold prices will not correct. Any dip could prove to be a good opportunity to buy into gold's underlying strength. " Demand for gold from central banks "remains at historically high levels, which is clearly helping to push gold prices higher as sovereigns favor gold as a safe haven against a deteriorating geopolitical outlook." Physical demand for gold in major consumer markets such as China and India also continues to be "hot." "

[Other data is still needed to stimulate gold prices further] McIntyre, senior portfolio manager at Sprott Asset Management, said that gold ETFs will continue to experience outflows this year. "Individuals and institutions appear content to hold risky assets," however, "given the dynamic financial and economic situation, this situation may change quickly." For now, central banks also continue to be "strong buyers of gold as they continue to diversify their reserves and prepare for a new set of economic and geopolitical tensions." McIntyre said that in the short term, for gold prices to move higher, there will need to be some new data that "highlights an economic slowdown, lower inflation, increased geopolitical tensions, or some negative moves in the stock market."