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The price of gold once again bears witness to history.

As of 17:00 Beijing time on July 17, London gold (spot gold) surged to a high of $2,482.24 per ounce, breaking the high point set at the end of May and the highest price in history without inflation adjustment since 1968. This also means that in just five trading days, the global gold price rose by 4%, an increase of nearly $100 per ounce.

The price of gold jewelry from jewelry brands also hit a new high, with prices of some brands rising to more than 750 yuan per gram. On July 17, the topics "gold price", "gold price rises again", and "analysts predict that gold prices still have room to rise" topped the hot search list.

After a bullish year, why is the price of gold still rising?

Why did it go up again?

2024 can be called a golden year. In the first three months since the beginning of the year, international gold prices have continued to set new historical highs.

After entering April, the price of gold began to fluctuate and consolidate. On April 22, the price of gold suddenly "brake", once hitting the largest single-day drop in nearly two years; in May, after the gold price hit a high of $2,450.1 per ounce on May 20, the price fell again from a high level; in June, the price of gold continued to fluctuate, and on June 9, "the gold price hit the largest drop since August 2021" was once again on the hot search.

It wasn't until July that gold prices resumed their upward trend and set a new record again.

Looking at the long term, according to Wind data, London spot gold and COMEX gold have both increased by nearly 20% this year; data from the Shanghai Gold Exchange showed that Au9999 (Shanghai Gold 9999) also hit a new high on July 17, and the cumulative growth since 2024 has also exceeded 20%.

The record high gold price is the result of multiple favorable factors.

Wang Hongying, director of the China (Hong Kong) Financial Derivatives Investment Research Institute, told China News Weekly that in addition to its metal properties, gold also has commodity properties and currency properties, which means that its price is affected not only by supply and demand, but also by risk aversion.

"There are two most direct reasons for this round of gold price increase. First, Federal Reserve officials recently stated that the Federal Reserve may consider launching a monetary policy of lowering interest rates, which is a direct benefit to interest-free assets such as gold. Secondly, the shooting incident during the campaign of former US President Trump on July 13 triggered concerns about the future of de-globalization and the US political landscape, which is again good for safe-haven assets." Wang Hongying said.

Wei Wei, a researcher at ANBOUND, told China Newsweek that concerns about the US budget deficit and slowing inflation data in June provide a policy basis for interest rate cuts, and the continued gold purchases by global central banks have also become a key "catalyst" for the surge in gold prices.

From the perspective of supply and demand, gold, as a safe-haven asset, is being "snatched" by central banks around the world.

On June 18, the World Gold Council announced that in a survey involving 70 central banks around the world, more than 80% of the central banks surveyed said that they expect foreign exchange reserve management agencies to continue to increase their gold holdings in the next 12 months. This is the highest record since the annual survey in 2019.

my country's central bank began its 18th consecutive increase in gold reserves in November 2022, increasing its gold holdings for 18 consecutive months; the Reserve Bank of India also "exploded" gold. It is estimated that the Reserve Bank of India's gold reserves increased by more than 9 tons in June, the highest level since July 2022.

Jewelry gold price exceeds 750 yuan/gram

As the international gold price rises, the price of gold jewelry also rises.

On July 17, the retail price of pure gold of gold jewelry brands rose to more than 750 yuan per gram.Chow Sang SangThe brand price is 754 yuan/gram.Chow Tai Fook, Saturday Fortune,Chow Tai Fook, Luk Fook Jewellery and other brands are 753 yuan/gram.

However, the high gold price has brought about a wait-and-see attitude, and consumers' mentality of "the higher the price, the more they buy" has changed with the high fluctuation of gold prices. China News Weekly recently visited and observed that many brand gold jewelry stores did not have many customers.

The unaudited main operating data released by Chow Tai Fook from April 1 to May 31, 2024 showed that the company's overall retail value fell by 20.2% year-on-year, the same-store sales of gold jewelry and products in mainland China fell by 29.8%, and the same-store sales of jewelry inlays, platinum and K-gold jewelry fell by 32.9%. As for the negative growth, Chow Tai Fook explained that it was "mainly affected by factors such as fluctuations in the external environment, geopolitical influences and continued high gold prices."

Coincidentally, according to media reports, Chow Wing-shing, chairman and general manager of Chow Sang Sang Group, stated at the shareholders' meeting that due to the rapid rise in gold prices in 2024, consumer willingness was restricted, and "sales performance was worse than expected."

Even Shuibei's prime merchants, who emphasize cost-effectiveness, have not been able to avoid the sluggish consumer sentiment. According to CCTV Finance, a Shuibei merchant said that his store's sales during the peak season of the May Day holiday this year fell by 40% to 50% compared with the same period last year.

Zhu Zhigang, vice president and chief gold analyst of the Guangdong Gold Association, told China News Weekly that the high gold price since 2024 has had a significant impact on the gold industry. If the gold price in the retail market continues to remain above 600 yuan, gold consumption will be greatly suppressed. In the recent downstream consumption, gold jewelry has declined significantly, and gold bars have also declined slightly, and overall sales are not very strong.

"Currently, domestic retail stores are affected by high gold prices and declining consumer income expectations, resulting in a relatively sluggish gold retail sector. Gold jewelry industry retail stores have also entered a destocking cycle," said Song Jiangzhen, senior researcher at the Southern Gold Research Institute.

The cold reception at the consumer end is also being transmitted to the upstream. In June this year, "Chow Tai Fook's Shenzhen factory stopped working and production" became a hot search. In response, Chow Tai Fook clarified that the adjustment was to move some production departments in the Shenzhen factory to the Shunde factory in Guangdong. Zhu Zhigang believes that with the fluctuation of gold prices, the production and retail ends of the gold industry will also face profound adjustments and changes.

In this regard, Song Jiangzhen suggested that the entire industry should respond to high gold prices by, on the one hand, stabilizing inventory levels to ensure that inventories do not fluctuate excessively due to rising gold prices; on the other hand, in the case of high gold prices, it should maintain operating liquidity and prepare relevant hedging risk control measures.

How long can it continue to rise?

The gold price has reached a new high. Will it rise or fall next?

Many institutions believe that the current gold price has not yet reached its ceiling.

Gold's riseJPMorganSurprised, it raised its gold price targets for 2024 and 2025, "Gold prices are expected to climb to $2,500 per ounce by the end of 2024 and reach $2,600 per ounce by the end of 2025."

Some institutions have given higher target prices. In early July, Citigroup predicted that the central bank's gold purchases in the future could support the gold price to stand at $2,700-3,000 per ounce in 2025.

Wang Hongying said that against the backdrop of expected depreciation of the US dollar, still tense international geopolitical situation and continued lowering of interest rates in some countries, the safe-haven effect of gold is still increasing and the supporting factors for structural increases still exist.

It is worth noting that, unlike the logic of consumption attributes, the rise in gold prices has spawned a wave of investment trends. Data shows that the world's largestGold ETFsSPDR (Exchange Traded Fund) - Holdings continued to increase, reaching 836.53 tons as of July 15, an increase of 8.92 tons from the beginning of the month.

Song Jiangzhen told China News Weekly that although the current domestic market enthusiasm for gold jewelry consumption is not high, its investment attributes are still hot. Investors generally buy gold for the purpose of preserving value, hedging risks, and fighting inflation.

Data from the World Gold Council shows that in the first quarter of 2024, mainland China's demand for gold bars and gold coins reached 110.5 tons, a year-on-year surge of 68%, the strongest first-quarter performance since 2013.

However, investment has risks, and there is a certain degree of uncertainty as to whether expectations can be fulfilled. Wei Wei pointed out that there are two expectations for the Fed's monetary policy in July or September, which is a key uncertainty factor. If the Fed's interest rate cut and timing do not meet market expectations, it may have a significant impact on gold prices.

In Wang Hongying's view, if the Fed's policy does not immediately enter the stage of interest rate cuts, then under the background of still adopting high interest rates, there is even the risk of a short-term technical decline in gold prices that cannot be ruled out.

"According to technical analysis from trading platform Forex24.pro, gold prices are currently in a short-term bullish trend and are expected to continue to rise with a target above $2,515. However, if gold prices fall below $2,375, further declines are likely," Wei Wei added.

Looking at gold from an investment perspective, its future price trend is affected by many factors, and it is very important to make reasonable allocations to cope with price fluctuations. After all, gold itself is a non-interest-bearing asset, and the time cost cannot be ignored.

Zhu Zhigang suggested that if you are considering gold allocation, the current situation is suitable for small batches, and you should not chase the rise and sell the fall. In addition, the proportion of gold allocation should not be too high. For long-term investment, it is recommended that the position should not exceed 5%-10% of the family assets.

"Ordinary investors should fully consider their own asset situation and risk tolerance when investing in gold to avoid being trapped at high levels," Wang Hongying reminded.

(This article is not intended as a basis for investment)

References:

"Gold prices fluctuate upward! In the first half of the year, the international gold price rose by more than 12%, and the domestic gold price rose by about 13%", 2024-07-01, Qianzhan.com

"Gold's rally shocked Wall Street! JPMorgan Chase raises its target price", 2024-07-17, Jinshi Data

Author: Yu Shengmei

Editor: Yu Yuan