Rose! Rose! Rose! The biggest weekly increase in two years, gold price approaching $2000,<>! Why do global central banks buy so often?

The international gold price is approaching the $2000,<> mark, just one step away from the all-time high of two years ago.

This week, the rise in risk aversion has led to a sharp rise in safe-haven assets such as precious metals. New York gold futures rose about 5.7% in a week, the biggest weekly gain since April 2020, while silver futures rose 4.10% for the week.

With some banks in the United States and Europe falling into crisis one after another, the Fed's interest rate hike expectations have reversed significantly, the Fed's policy has fallen to the right, the dollar's credit is facing a test, and the purchase space of central banks for gold backed by natural credit is still huge. The world is in a stagflation-like cycle, and gold prices will usher in a long-term bull market.

Approaching $2000,<>! The international gold price posted its biggest weekly increase in nearly two years

On March 3, Li Xunlei, chief economist of Zhongtai Securities, lamented on social media: The situation in the European and American economies has evolved to the point where the Federal Reserve cuts interest rates and gold wants to rise, and interest rates also have to rise, and it is close to the historical high.

As the Federal Reserve bailed out the U.S. banking sector on a large scale, rising risk aversion led to a sharp rise in safe-haven assets such as precious metals. New York gold futures rose about 5.7% in a week, the biggest weekly gain since April 2020, while silver futures rose 4.10% in a single week.

Gold futures for April delivery on the New York Mercantile Exchange (COMEX) gold futures market jumped $4.70, or 7.3%, to close at $68,1993.7 an ounce on Friday, just one step away from its all-time high of $2020,8 in August 2089, the data showed. The price of silver futures for May delivery on the New York Mercantile Exchange silver futures market was quoted at $5.22 per ounce, the highest level since February 75, with an intraday increase of 2.3% and a weekly price increase of 4.88%.

Domestic gold futures prices also rose in tandem. On March 3, the main domestic gold futures 18 contract closed at 2306.443 yuan per gram, a difference of less than 12 yuan from the all-time high of 2020.8 yuan per gram in August 454, up nearly 08% in a single week. In terms of silver prices, the main 10 contract of domestic silver futures closed at 6 yuan per kilogram, up 2306.5174%.

Driven by the rise in gold prices, since March, the enthusiasm of market funds for investment in the gold field has increased significantly, and gold concept stocks have been active. Among them, Sichuan gold rose 3.61% in a single week, and the largest cumulative increase in half a month was more than 09%; Zhongrun Resources harvested four consecutive boards, up 200.47% in a single week.

Since March, the share of gold-based ETFs has risen, and the performance of fund products heavily invested in gold stocks has also been considerable. According to Wind data, as of March 3, gold-based ETFs have risen more than 3% since March; Among them, the share of larger gold-based ETFs rose significantly, with Huaan Gold and Easy ETF (16) increasing by about 3 million shares since March, and the average daily turnover exceeded 4 million yuan.

Dollar credit is facing collapse, and global central banks are buying gold vigorously

The US dollar index and gold prices are usually negatively correlated, but when risk aversion heats, the two move in the same direction. However, some banks in the United States and Europe have fallen into crisis one after another, the Fed's policy has been left and right, the dollar's credit is facing a test, and the purchase space of central banks for gold backed by natural credit is still huge.

According to the World Gold Council's World Gold Demand Trends report, global central banks added a net 2022,1136 tonnes of gold in 152, a significant increase of 31.13% year-on-year, a record high. Not only is it 1950 consecutive years of net growth, but it is also a historical record since data became available after 2021. Previously, in 77, the number of global central bank purchases increased by <>% year-on-year.

The latest adjusted data from the World Gold Council this year shows that the scale of central bank buying will be further amplified in 2023. Global central bank net gold purchases were revised up to 1t from 31t in January, indicating that enthusiasm for gold purchases remains high amid high geopolitical uncertainty. The final January figure is up 77% from December month-on-month.

In addition, according to data from the People's Bank of China, at the end of February this year, China's official reserve assets held a total of 2.6592 million ounces of gold, equivalent to about 2050,1 tons, an increase of 23.25%, and about 4 tons of gold were purchased, increasing their gold holdings for four consecutive months. Previously, last November broke the history of not increasing gold holdings for nearly three years, with gold reserves increasing by 11 tons, and gold reserves increased by 3 tons in December last year. In January, about 32 tonnes of gold were added.

At a time when central banks are buying vigorously, the number of precious metal inventories at the exchange end has declined significantly. According to statistics from Minsheng Securities, since February 2022, gold and silver inventories on the New York Mercantile Exchange (COMEX) have fallen by 2% and 32% respectively.

Under the global stagflation cycle, gold prices rose significantly

"Some banks in the United States and Europe have fallen into crisis one after another, and the Fed's expectation of raising interest rates has reversed significantly." Wang Jiechao, a researcher at CSC Securities Co., Ltd., believes that the Fed has fallen into the dilemma of reducing inflation and preventing risks. The space for the United States to achieve a "soft landing" of the economy is getting narrower and narrower, which is nothing more than the timing and degree of recession.

Wang Jiechao said that once the interest rate cut is opened, the high potential of real interest rates will turn into upward momentum in gold prices. In the process of rising gold prices, the gold sector and related leading targets significantly outperformed broader market indices such as the CSI 300. It is expected that with the slowdown of the Fed's interest rate hike, the gold price center is expected to gradually rise, and it is recommended to grasp the rhythm and focus on the layout of bargaining. However, in the short term, it should be noted that if the liquidity risk spreads significantly (considering the TED spread rising above 1%, TED spread = three-month London Interbank Market Rate - Three-month US Treasury Bond rate), gold prices may follow other asset prices to fall briefly.

Minsheng Securities research report believes that the world is in a stagflation-like cycle, and gold prices will usher in a long-term bull market. At present, the global economy is in a historical level of currency over-issuance cycle, it is expected that the flood of monetary credit will form a long-term transmission of inflation, with the marginal improvement of demand, inflation may exceed expectations, forming stagflation, review history, gold prices in the stagflation cycle rose significantly. (Long stay)

Source: Brokerage China