Gold prices are one step away from record highs, and central banks are increasing their holdings vigorously

Securities Times reporter Changliu

The international gold price is approaching the $2000,5 mark, close to the all-time high two years ago. Last week, rising risk aversion sent safe-haven assets such as precious metals sharply higher. Among them, New York gold futures rose about 7.2020% in a week, the biggest weekly gain since April 4; Silver futures rose 10.41% for the week.

With European and American banks such as Silicon Valley Bank, Signature Bank, Credit Suisse falling into crisis one after another, the Fed's expectation of raising interest rates has reversed significantly, and the dollar's credit is facing a test. Central banks still have a huge buying space for natural credit-backed gold.

Analysts believe that the world is in a stagflation-like cycle, and gold prices are facing a long-term bull market pattern.

Safe-haven assets soared

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.

On Friday, 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, just one step away from its all-time high of $2020,8 in August 2089, the data showed. The New York Mercantile Exchange silver futures market quoted $5.22 per ounce for May delivery, the highest level since February 75, up 2.3% intraday and 4.88% in a single week.

Domestic gold futures prices also rose in tandem. On Friday, the main domestic gold futures 2306 contract closed at 443.12 yuan per gram, less than 2020 yuan from the all-time high of 8.454 yuan per gram in August 08, up nearly 10% in a single week. In terms of silver prices, the main 6 contract of domestic silver futures closed at 2306 yuan per kilogram, up 5174.3%.

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 exceeded 09%; Zhongrun Resources harvested four consecutive boards, up 200.47% in a single week. At the same time, the share of gold-based ETF funds increased, and the fund products with heavy positions in gold stocks also performed considerably.

Central banks are buying gold aggressively

Historically, the U.S. dollar index and gold prices have typically been negatively correlated, but when risk aversion heats up, the two move in the same direction. Recently, some banks in the United States and Europe have fallen into crisis one after another, and the rise in risk aversion has caused investors to flock to precious metal assets, and the credibility of the US dollar has been tested. Central banks still have a huge buying space for natural credit-backed gold.

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 the 1950th consecutive year of net inflows, but it is also a historical record since data became available since 2021. Previously, in 77, the number of global central bank purchases increased by <>% year-on-year.

This year's latest adjusted data from the World Gold Council shows that 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.

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, which has increased its gold holdings for four consecutive months. In November last year, the gold reserve increased by 11 tonnes, the gold reserve increased by 3 tonnes in December last year, and about 32 tonnes in January this year.

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

Institutions: Gold prices will welcome a long-term bull market

Wang Jiechao, a researcher at CSC Securities, believes that the Fed has fallen into the dilemma of reducing inflation and preventing risks, and 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 the recession period.

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 indexes such as the CSI 300. It is expected that as the Fed's interest rate hike slows, the gold price center is expected to gradually rise. However, in the short term, it should be noted that if the liquidity risk spreads significantly, the price of gold may fall briefly with the prices of other assets.

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 monetary over-issuance cycle, and the flood of monetary credit will form a long-term transmission of inflation, and with the marginal improvement of demand, inflation may exceed expectations, forming stagflation. Historically, gold prices have risen significantly during stagflation cycles.

CCB Fund said that the subsequent European and American economies are likely to go into recession, the Fed's path to end interest rate hikes within the year and then turn to interest rate cuts is clear, the US real interest rate will enter a downward cycle, and the direction of subsequent gold price upward is more certain, but there is uncertainty in the time rhythm. In addition, potential risk factors such as overseas financial systems and geopolitics have also boosted safe-haven demand for gold, supporting gold prices. In the context of the continuous overdraft of the US dollar's credit, gold as a reserve currency has also been favored by central banks.