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against the backdrop of global monetary easing, gold has been soaring to new highs, but its volatility at high levels has also increased.

on september 25, gold prices hit a new record high at home and abroad. london gold once stood at $2,670/ounce, and shanghai gold broke through the 600 yuan/gram mark during the trading session. at the same time, gold stocks also rose. china gold and shandong gold rose by 3.79% and 2.59% respectively, and yongying gold stock etf and huaxia gold stock etf rose by 2.11% and 1.95% respectively.

however, as the gold price rises, the fed's monetary policy change expectations are gradually realized, some profitable investors choose to leave the market, and the shares of many gold etfs have shrunk. in interviews, many fund companies said that the outflow of funds from trading plates may lead to increased volatility in gold prices, so investors are advised to shift from game thinking to a more appropriate allocation strategy. in the global trend of excessive issuance of credit currencies and de-dollarization, gold has a higher allocation value.

four major factors boost gold prices

in fact, in the long run, this round of gold market has gone through a bull market of nearly two years. the spot price of london gold has risen from us$1,614/ounce in september 2022 to the current us$2,670/ounce, an increase of 65%. especially since the beginning of this year, the price of gold has gradually steepened, with domestic and foreign gold prices rising by more than 28% and 22% respectively, and the csi gold industry stock index has also risen by more than 15% this year.

huaan fund believes that the continued upward trend in gold prices is the result of the combined effect of multiple factors, including changes in monetary policy, economic environment and geopolitical situation:

one is monetary behavior and over-issuance of credit currency.the essence of the rise in gold prices is to counter the over-issuance of credit currency. under the gold standard, the central bank cannot issue currency independently. therefore, there was no over-issuance of currency before 1930, and the price of gold was relatively stable. however, with the disintegration of the gold standard, the massive issuance of credit currency led to a continuous decline in the purchasing power of currency, and the price of gold rose accordingly.

the second is the start of the federal reserve’s interest rate cut cycle.recently, the federal reserve confirmed a 50 basis point interest rate cut, starting a rate cut cycle. the market expects that the us real interest rate will continue to decline, which is usually conducive to the performance of gold.

the third is the trend of “de-dollarization”.against the backdrop of high us debt and deficit, the international financial system has seen a trend of "de-dollarization". global central banks have reduced the weight of us dollar asset allocation, increasing demand for gold, making gold outperform us treasury bonds during the same period.

fourth, geopolitical risk.geopolitical risks are still spreading locally. for example, recently, the geopolitical situation in the middle east has become tense again, and a communication equipment explosion occurred in lebanon. risk aversion sentiment has risen against the backdrop of the escalating geopolitical situation in the middle east, further boosting the demand for gold allocation.

it is worth mentioning that compared with the overseas gold price, the rmb gold price has a certain discount, which is in sharp contrast to the high premium in september last year.

boshi fund believes that the essence is that under the influence of high gold prices, the demand for physical gold in china has been suppressed and weakened, the sales of gold and silver jewelry have continued to decline and turned negative year-on-year, and the import volume of gold has also declined rapidly, hitting a two-year low. although the domestic gold price is relatively weak, from historical experience, both the exchange rate expectations and the discount level have created a good environment for investment in the current rmb gold price. in the future, as related factors and sentiments recover, the domestic gold price is still expected to return to outperforming the international gold price.

divergence in capital flows

however, as gold prices reached historic highs, there were clear divergences in capital flows.

in the international market, as of september 24, the world's largest gold etf, spdr gold trust, held 875.39 tons, an increase of 19.27 tons from 856.12 tons a month ago. the etf has received net inflows for three consecutive months.

at the same time, after the import tax rate was lowered, india's gold imports hit a record high. according to data released by the indian government a few days ago, india's gold imports in august reached us$10.06 billion in dollar terms, a record high. according to preliminary estimates by consulting firm metalsfocus, this is equivalent to about 131 tons of gold imports, and is expected to hit the sixth highest level in history in terms of import volume.

however, compared with the international market, there has been a significant outflow of domestic gold etfs, with many funds choosing to take profits and leave.

wind data shows that as of september 24, the fund shares of huaan gold etf, the largest gold etf in china, have continued to fall from 4.79 billion shares at the peak in early august to 4.185 billion shares, a decrease of 605 million shares, with a net outflow of about 3 billion yuan. during the same period, products such as e fund gold etf and bosera gold etf also experienced net outflows.

some industry insiders believe that the reason why funds are withdrawn in advance is that investors are worried about the decline in gold prices after the interest rate cut. however, the trend of gold prices since the interest rate cut on september 18 has shown a large difference in expectations.

liu tingyu, fund manager of yongying gold stock etf, said that from historical experience, the volatility of gold will be amplified before and after the first rate cut by the federal reserve. it is not ruled out that some funds have the demand for profit-taking, but as the federal reserve continues to cut interest rates, gold etf investors and other trading disks may continue to bring in funds, and are expected to push gold into a new round of main rising waves together with global central banks. the subsequent increase in the us deficit rate and the intensification of global geopolitical risks are expected to push up the central price of gold.

from game theory to configuration strategy

recently, many international investment banks and domestic institutions have spoken out, predicting that the international gold price may further rise to us$3,000 per ounce in the medium term, triggering further market speculation on gold investment. is the international gold price expected to start a new round of rising prices?

regarding the price of gold, wang xiang, fund manager of the index and quantitative department of bosera funds, is more cautious. he believes that the increase in gold prices has been highly realized so far this year, and the expectations of the federal reserve's monetary policy shift are being realized. the departure of some profitable investors may lead to increased volatility in gold prices. in addition, geopolitical instabilities such as the us election and the israeli-palestinian conflict will lead to continued risk hedging by funds.

therefore, he expects that the volatility of gold prices may increase in the second half of the year. from a medium- to long-term perspective, the current environment is still favorable for the gold market, but it is more appropriate to recommend that investors shift from a game-playing mindset to a more appropriate allocation strategy.

"taking the stock-bond combination that investors are more familiar with as an example, we calculated the historical performance of different stock-bond ratios between december 31, 2002 and december 31, 2023, and found that the allocation ratio of gold in the combination is relatively good at about 10% to 12%. historically, many overseas long-term management institutions have allocated gold within the range of 10% to 15%. for investors with a lower risk appetite, we recommend that they consider adjusting the gold allocation ratio to around 70% based on their own risk tolerance." wang xiang suggested.

as for gold stocks, due to the rapid appreciation of the rmb against the us dollar and the overall correction of the a-share market in the early stage, gold stocks and gold have deviated to a certain extent. liu tingyu said that at present, gold stocks have been adjusted relatively fully, and the current pe valuation level is at a relatively low level below 19% in the past five years. a leading overseas hedge fund company has also recently pointed out in its report that gold stocks (gold mining companies) have good investment value. judging from the 2024 semi-annual report, the performance of listed companies in the gold industry chain is outstanding, and the net profit growth rate and roe rank high among all a-share sub-industries. the upward gold price stimulates gold mining companies to increase capital expenditures, and subsequent production growth can be expected.