The purchase of gold by central banks of many countries, the safe-haven demand brought about by geopolitical conflicts and the market's enthusiasm for going long are still continuing, and COMEX gold continued to set a new high on April 9. As of 10:42 on April 10, COMEX gold was quoted at US$2,369.3 per ounce, up 0.29%. COMEX gold hit a record high of US$2,384.5 per ounce during trading on April 9. Shanghai gold rose 0.62% to 558.8 yuan per gram, refreshing a record high of 560.88 yuan per gram during trading on the 10th. As for other precious metals, as of 10:42 on April 10, COMEX silver was quoted at US$28.225 per ounce, up 0.86%; Shanghai silver rose 0.99% to 7,214 yuan per kilogram. How long can the crazy gold price continue to rise? Some institutions are even bullish on the price to $3,500. UBS said that the recent trend of gold has completely "deviated" from the trend of real interest rates, and the pricing model can no longer explain the rise in gold prices. The rise in silver prices driven by risk aversion, investment demand and rising gold prices also boosted silver production in March.

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The gold purchases by central banks of many countries have become an important factor supporting this round of gold prices hitting new highs.

According to data from the People's Bank of China, China's gold reserves stood at 72.74 million ounces at the end of March and 72.58 million ounces at the end of February, marking the 17th consecutive month of increasing gold reserves. Many experts believe that the proportion of gold in China's international reserves is relatively low, and it is still a general trend for the central bank to increase its gold holdings in the future. The current gold price has hit new highs. Experts point out that gold has become the first choice for safe-haven assets. The gold price will be supported for some time to come, and the highest gold price may reach US$2,500 per ounce. "The central bank only increased its gold holdings by 5 tons in March this year, which was the smallest increase in the past 17 months," Zhao Qingming, deputy director of the China Huiguan Information Technology Research Institute, told a Cailian reporter. Gold prices have continued to rise this year and are already somewhat overvalued. However, he also believes that the proportion of gold in China's international reserves is far lower than that of the United States, Germany, France and other countries, and also lower than that of Russia. Therefore, it is necessary to increase holdings moderately, which is conducive to the diversification of international reserves, the realization of value preservation and appreciation, and the support of RMB internationalization.

Central banks, led by India, increased their gold reserves for a ninth straight month in February, the World Gold Council said. Central banks' net purchases in February were 19 tonnes, with the Reserve Bank of India and the Central Bank of Kazakhstan increasing their holdings by 6 tonnes each. Spot gold prices have surged recently, hitting a record high of $2,288.40 an ounce on Wednesday. Gold prices were already at all-time highs before March, thanks to long-term tailwinds such as central bank purchases.

According to data from the World Gold Council, as of December 31, 2023, the total gold reserves of countries around the world are 36,203 tons. Among them, the United States' gold reserves are 8,133 tons, accounting for 22.5% of the world's total. Germany ranks second with 3,355 tons of gold reserves. Italy, France, Russia, China, Switzerland, Japan and other countries also have large gold reserves.

[Global gold ETF funds outflow of US$823 million in March, outflow in Q1 reached US$6.5 billion] Data from the World Gold Council showed that in March, global gold ETF funds continued to outflow (a decrease of US$823 million), but the outflow rate was much slower than in previous months, as inflows into North America (an increase of US$360 million) and Asia (an increase of US$217 million) buffered losses in Europe (a decrease of US$1.4 billion). In March, although global gold ETF holdings fell further, the total assets under management of global gold ETFs increased by 8% due to the strengthening gold prices. In the first quarter of this year, global gold ETF outflows reached US$6.5 billion, led by North America (outflow of US$4.3 billion) and Europe (outflow of US$2.9 billion), while Asia (inflow of US$678 million) attracted the largest inflows.

Hunan Gold released its performance forecast for the first quarter of 2024 on the evening of April 9. The net profit attributable to shareholders of the listed company was 149 million yuan to 170 million yuan, an increase of 40% to 60% over the same period last year. The net profit after deducting non-recurring gains and losses was 147 million yuan to 168 million yuan, an increase of 40% to 60% over the same period last year. Regarding the increase in performance, Hunan Gold explained that the change in performance was mainly due to the increase in product prices.

The continued rise in silver prices drove silver production in March to increase both year-on-year and month-on-month

According to SMM research statistics, the production of silver on March 1, 2024 was 1554.57 tons (of which the production of mined silver was 1015.57 tons), an increase of 278.476 tons from last month, a month-on-month increase of 21.82%, and a year-on-year increase of 11%. The main reason was that silver prices rose for three consecutive weeks in March. Under the continued rise in silver prices, companies that were selling silver-containing waste materials in the market were very active. Due to the recent surge in domestic silver-containing ore prices and the relatively high silver price in April, the market acceptance is not expected to be high. SMM expects that silver production in April may fall slightly.

Institutional Voice

Guotai Junan Research Report pointed out: Since late March, gold and the US dollar have seen a wave of double increases, breaking the market's inherent impression that "gold and the US dollar are negatively correlated.” In fact, since the end of 2018, the negative relationship between gold and the US dollar index has gradually weakened, and even showed a positive correlation. Why has the relationship between gold and the US dollar diverged? How to understand the reasons for the current rise in gold prices? The monetary properties of gold have weakened and are no longer the dominant factor in pricing. We believe that the “de-dollarization” narrative hotly discussed in the market can only constitute a trend explanation. Breaking down the trading structure of gold, we find that the People's Bank of China and gold ETFs are the dominant forces in this round of market trends. The PBOC's gold purchasing behavior is mainly driven by the orientation of stabilizing the exchange rate. The subsequent trend of gold will largely depend on the orientation of my country's monetary policy. In the short term, the decoupling of domestic market interest rates and policy interest rates will continue, monetary policy will focus more on structural regulation, the necessity of policy interest rates will decrease, and the PBOC's demand for gold purchases may slow down; in the long term, if the necessity of internal regulation precedes the shift in external monetary policy, in order to enhance the operational autonomy of monetary policy, the PBOC may have further demand for gold purchases, and may give rise to a new gold market.

On April 8, UBS strategist Joni Teves released a report saying that gold hit a new high in the new week. There were some positive news in the market (such as Zimbabwe issuing gold-backed currency), but these factors themselves were not enough to explain the sharp rise in gold prices. The gold price broke through the pressure level and broke the relationship with the macro fundamentals, and even broke the gold pricing model (the key factors considered in the model include: US dollar exchange rate, real interest rate, MOVE and VIX and other volatility indicators). UBS said that residual analysis shows that the model cannot explain most of the recent increase in gold prices. In addition to traditional influencing factors such as the US dollar exchange rate, real interest rates and uncertainty indicators, there may be other important driving forces behind the recent increase in gold prices. UBS pointed out that long positions in the gold market have increased significantly, with total speculative net long positions and fund managers' net long positions close to their highest levels in the past 12 months. In the short term, the rapid rise in gold prices may bring about a certain degree of risk of a pullback due to profit-taking.

Ed Yardeni, a longtime Wall Street bull and president of investment advisory firm Yardeni Research, believes the gold rally will continue, especially if inflation returns. He predicts gold prices could rise to as high as $3,500 by the end of next year, which would mean a 49% increase from Monday’s price of around $2,347. He believes inflation could repeat the mistakes of the 1970s, when prices began to spiral upward and gold soared from $35 an ounce to a peak of $665 an ounce.

Tim Waterer, chief market analyst at KCM Trade, said: "Gold has always been the 'preferred asset' in the financial market, and the undercurrent of central bank buying and speculative funds has continuously pushed gold prices to new highs. If inflation data this week is on the high side, it would pose a risk. But gold was unfazed by rising bond yields this week, which could be a bullish sign for gold in the medium term.”

“We are seeing some rotation in the silver market again as short-term speculators are now speculating on silver prices, effectively catching up given that gold has outperformed silver over the past month or so,” said Kelvin Wong, senior market analyst for Asia Pacific at OANDA.

“I think there are two factors (driving gold prices higher),” said Bob Parker, senior adviser to the International Capital Markets Association (ICMA). The first factor is what I call the catch-up effect. If you look at gold relative to global equities last year and early this year, gold has lagged far behind. Investors saw gold underperforming and therefore increased their exposure to gold.” “What’s relevant to this is actually the correlation between gold and Bitcoin, and while people may debate whether or not that makes sense, the fact is that there is a correlation between Bitcoin and gold.” “Another factor that is hard to get data on is that I do think some central banks are buying gold, particularly in the Asian region, adding to their foreign exchange reserves.” Looking ahead, Bob Parker said gold’s fundamentals appear to paint a bearish picture, citing a stronger dollar, rising U.S. Treasury yields, spreading doubts about the Federal Reserve’s path of rate cuts, and “reasonably” low inflation. “All of these factors, frankly, actually suggest that there is very little upside for gold prices,” he said. I think gold is very vulnerable to a pullback right now.”

“We have been very bullish on precious metals for some time,” said Edmund Shing, chief investment officer at BNP Paribas Wealth Management. So this is obviously good, but even we are a little confused by the strength in gold. ” “What’s interesting about gold, and I think very encouraging in the medium term, is that the momentum in gold has completely broken away from its traditional correlation with real rates and the dollar.” Edmund Shing said gold prices appeared to be getting some boost as investors "look further ahead" to issues such as debt sustainability. Like Bob Parker, he also highlighted the role of central bank demand in boosting gold prices. “Let’s not forget that central banks around the world, particularly in China, India and emerging markets, have been accumulating gold quite steadily,” he said.

Institutional analyst Richard Snow said gold prices had been strengthening last week despite rising U.S. Treasury yields. The recent escalation in tensions in the Middle East has increased the appeal of gold due to its safe-haven properties. But the market has returned to massively overbought territory, which means there could be a cooling-off period early this week in the absence of further escalation.

David Rosenberg, a top U.S. economist and president of Rosenberg Research, believes that gold's rally is not over yet. That momentum could push gold prices to $3,000 an ounce before the next business cycle turns, a 30% gain from current levels, he said.

Wang Yi, general manager of Beijing Guohua Jewelry and gold investment analyst, told a reporter from Cailianshe that central banks around the world have collectively entered the race to increase their gold holdings, and this is not unique to my country. As the "currency of currency", the role played by gold at the current stage has surpassed the general "consumer goods" or "investment targets" and has become the first choice for safe-haven assets. Wang Yi believes that since there are no previous highs or inside swing lows to mark potential resistance levels for metals to rise, the next area that could play this role could be the 200% extension level of the May to October 2023 decline, around $2,340. A breakout higher might encourage traders to target the psychological level of $2,500. Zhao Qingming believes that if there are no major changes in geopolitics this year, it is possible that the price of gold will exceed $2,400 or even $2,500 per ounce.

In the fund market, "gold-related" products have all risen, and gold stock ETFs have been leading the way, hitting the daily limit for three consecutive trading days. Since the beginning of this year, funds investing in precious metals and non-ferrous metals have generally performed well. Some public fund personnel said that boosted by the strong performance of precious metals, stocks in the upstream and downstream industrial chains of mining resources are in favor, and "gold-related" stocks still have room for growth in the future.

COFCO Futures Research Report pointed out: Although the current upward trend of gold prices is certain, after setting new historical highs, what is important is no longer the absolute price height, but the rhythm. It is expected that there may be two pullbacks in the process of the upward trend. The first one is based on the macro point of view. The Federal Reserve is likely to start cutting interest rates in August. The gold price will pull back during the adjustment of expectations; but the overall pullback will not be large. The second time was the first interest rate cut on August 1st. The decline will be slightly larger than the first time. But the medium- and long-term logic is positive. The expected price range of Shanghai gold is [500,570] yuan/gram, and the price range of New York gold is [2080,2450] US dollars/ounce. At present, the market will adjust the starting time of interest rate cuts, and gold will be under short-term pressure. The medium- to long-term (within the year) bullish trend will continue, and interest rate cuts are expected to begin in August, with 2-3 cuts within the year, which will be bullish for precious metals, mainly gold, in the medium- to long-term (2024-205).

A research report titled "It's an Ever-changing World: Silver May Shine After the Record-breaking Gold Boom" by Huawen Futures pointed out: In the past few years, gold has generally outperformed silver, but this phenomenon may change and the trend may turn in favor of silver. The Silver Institute said that global silver supply will be in short supply for the fourth consecutive year, and it expects the silver supply deficit to be 176 million ounces in 2024, while demand will rise to the second highest level on record, which increases the potential for silver prices to rise, even by about double by the end of 2024. “The higher the price of gold goes, the more interest in silver will naturally increase,” said Peter Spina, founder and president of SilverSeek.com. Gold has broken out to new all-time highs and silver has lagged behind and has been doing so for some time.”

Jena Santoro, senior manager of information solutions at Everstream Analytics, said gold has been outperforming silver since 2016. This is a long-term trend that is likely to be driven by end-use applications and their relative value. However, there is always the possibility that gold's outperformance of silver could reverse, as silver has a wider range of industrial uses than gold. Santoro said that based on the performance of gold and silver futures prices, that is not the case right now, but silver futures could outperform gold this year and could hit a 10-year high of around $30 an ounce due to new demand for silver from industrial uses. This year “ could be a reversal year for silver ,” she said.

The latest Kitco News Weekly Gold Survey shows that Wall Street’s optimism about the market this week outstrips even the unstoppable optimism of retail investors as greater concerns about geopolitical unrest overwhelm fears that gold prices are retreating from their latest highs. This week, 12 Wall Street analysts participated in the Kitco News gold survey, and their responses show that bullish sentiment has completely captured the imagination of institutions. Nine experts (75%) expect gold prices to climb further next week, while only one analyst (just 8%) predicts a fall. The remaining two experts (17%) said that both bullish and bearish factors exist and it is impossible to predict the trend next week. Meanwhile, Kitco's online survey cast 240 votes, with 75% of investors expecting further gains or volatility in gold prices. 159 traders (65%) expect gold prices to rise next week. Another 41 people (17%) predicted that gold prices would fall, while 40 respondents (17%) were neutral on the near-term outlook for gold.

Pavilonis said there was no sell-off in the market despite a steady stream of hawkish comments from various Federal Reserve officials this week. “Now you add to that the possibility of some of the geopolitical issues going on in the Middle East escalating, and in that context, that’s bullish for gold in the short term. If nothing happens over the weekend, he thinks commodities could see a pullback early next week. “If nothing comes of it, energy prices go down, and then you might see gold take a breather,” he said. I think gold could go back to a nice round number like $2,000.”

Citi raised 0-3 month price targets for gold and silver by 9% and 16% to $2,400 per ounce and $28 per ounce, respectively; and raised the upper limits of our bullish scenario target prices for gold and silver for 6-12 months to $3,000 and $32 per ounce, respectively; under the bullish scenario, they believe that the gold market will reach an average price of close to $2,500 per ounce in the second half of the year, and the possibility of silver reaching an average price of $30 per ounce will increase.

Sugandha Sachdeva, founder of SS WealthStreet, said: “Gold prices have risen for three consecutive weeks despite the strength of the dollar. The key factors driving gold prices higher are increased bets on the Federal Reserve easing monetary policy and the worsening geopolitical situation in the Middle East. Another official factor boosting gold and silver prices is China's heavy buying in recent weeks. Continued central bank buying and uncertainty ahead of elections in major economies this year have also boosted gold's appeal as a safe-haven asset. In addition, the depreciation of the Indian rupee also supported the domestic gold price in the country.” Speaking of the Fed's easing of monetary policy, it said: "Although Fed officials sent mixed signals on rate cuts this week, market sentiment is leaning towards expectations of a rate cut in June as price pressures in the U.S. economy are fading."

Wang Qing, chief macro analyst at Golden Credit Rating, believes that there are three reasons for the continued rise in international gold prices denominated in US dollars: First, expectations of a rate cut by the Federal Reserve are rising, and an increase in gold demand is a normal market reaction; second, many central banks have continued to increase their gold holdings since the beginning of the year. The rise in geopolitical risks and the high uncertainty of the global trade environment have made central banks pay more attention to gold reserves. Data show that in the past two years, the demand brought about by the increase in central banks' gold holdings has accounted for about 25% of the total market demand; third, since the Chinese New Year this year, domestic people's enthusiasm for buying gold has been high. In addition to the release of seasonal consumer demand, it is also related to factors such as increased volatility in the capital market and the highlighting of gold's investment attributes.

Nicholas Frappell, global head of institutional markets at ABC, said that while there may be motivation in Western markets to hedge against strong stock markets, the rise in gold was actually driven mainly by global factors, including the need for diversified investments by central banks in emerging markets and the exhaustion of the sell-side market.

Guotai Junan Securities research report pointed out that since March, gold prices have risen sharply in the short term, silver inventories have continued to be liquidated, and silver COMEX futures and silver ETF holdings have increased. In terms of commodity attributes, the growth of global mineral silver supply is limited, and photovoltaics + AI drive industrial demand growth. It is expected that the supply and demand of silver will remain in short supply, and the supply and demand fundamentals will provide strong support for the silver price. In terms of financial attributes, it is expected that the continued increase in market attention will further stimulate silver investment demand and trigger a rapid rise in silver prices. It is recommended to pay attention to targets such as Shengda Resources, Industrial Silver and Tin, Yintai Gold, and Jingui Silver.

CITIC Group said that this round of inflation and asset price trends are very similar to the first wave of high inflation in the 1970s, and there are signs that US inflation will rise again in the future. Once the inflation rebound trend is established and consumer confidence declines again, US stocks will face downward pressure again. Once inflation picks up again in the future and data confirms it, gold will have room for further gains. During periods of high inflation, gold has more credit hedging and anti-inflation properties than U.S. stocks. In the future, gold and U.S. stocks may shift from their current resonant rise to differentiation, and gold will have relative gains relative to U.S. stocks.

Huatai Securities Research Report believes that in the first quarter of 2024, the domestic RMB-denominated gold and silver prices were better than the US dollar-denominated LME gold and silver prices, achieving positive growth both year-on-year and month-on-month. We believe that domestic gold and silver prices are better than overseas mainly because domestic monetary policy is easier. We believe that as liquidity in the United States returns to easing and major central banks around the world continue to maintain large-scale gold purchases, coupled with increased holdings of major global gold ETFs and geopolitical event risks, the LME spot gold price may rise to the range of US$2,600 to US$3,000; and many gold companies have increased gold production.