Gold prices soar to record highs! Have you reached your highest point? How long will it go up?

Text/Wang Lichen

Gold prices are still rising.

Since May, the international spot gold price has risen from $5,1 per ounce (31 ounce of gold is about 1035.1990 grams), hitting an all-time high of $5,4.2081 per ounce on May 82, and falling back to around $6,2016 per ounce on the <>th.

The retail price of gold is also rising. The price of gold in many gold stores rose from about 3 yuan per gram in mid-to-late March to about 570 yuan per gram. "It is not impossible to break through 592." A salesman in the gold jewelry sales area of Beijing's Ganjiakou Building told Guoshi Through Train.

Gold prices have risen all the way, what factors are affected? Will it keep rising?

What is the continuous rise?

Wan Zhe, a researcher at the Belt and Road College of Beijing Normal University and former chief economist of China National Gold Group, said in an interview with China News Agency that the current continuous rise in gold prices is still affected by the continued spread of the US banking crisis and the Fed's interest rate hike.

After the collapse of Silicon Valley Bank and Signature Bank, the stock price of the First Republic Bank in the United States continued to fall. Since the beginning of this year, the share price of First Republic Bank has fallen by 97%. After struggling for a month, it was eventually acquired by JPMorgan Chase.

"The US banking crisis has once again fermented, and the panic in the market has never receded." Wan Zhe said.

Wan Zhe analyzed that after the acquisition of First Republic Bank, banks such as Westpac, which has been flowing out of deposits and falling stock prices, is facing a similar dilemma to First Republic Bank and may repeat the mistakes of the past.

"Fears of a financial crisis have increased risk aversion in the market, and the price of gold as a safe-haven asset has naturally been pushed up."

In addition, Wan Zhe believes that the Fed's interest rate hike has led to market concerns about the future of the economy, which in turn has pushed gold prices higher.

In the early morning of the 4th Beijing time, the Federal Reserve announced that it would raise the target range of the federal funds rate by 25 basis points to between 5% and 5.25%. Fed Chairman Jerome Powell revealed at a press conference that the Fed has not yet made a clear decision on whether to stop raising interest rates.

Wan Zhe pointed out that although financial markets very much hope that the Fed will cut interest rates, the first quarter of the US economic growth is not satisfactory, and the contraction of credit conditions will be more pronounced in the second half of this year. "In this situation, there will always be concerns about the economy."

Central bank gold purchases may become the norm

Data released by the World Gold Council showed that global central bank demand for gold increased sharply in the first quarter, with global official gold reserves increasing by 228t and bar and coin investment demand up 5% y-o-y to 302t. Driven by recession fears and risk aversion amid banking turmoil, US bar and coin demand reached 32t in Q2010, the highest quarterly level since <>.

On May 5, China's central bank released data showing that China's gold reserves at the end of April were 7.4 million ounces, an increase of 6676,26 ounces from the previous month, the sixth consecutive month of incurring holdings.

Some analysts pointed out that some central banks' purchase of gold has also boosted the investment attractiveness of gold to a certain extent. But in Wan Zhe's view, this is the cause of the reverse effect.

Wan Zhe pointed out that for some time, the continuous international geopolitical conflicts, the spread of the US banking crisis, and the global questioning of the influence of the US dollar hegemony in the currency have increased global risk aversion. "It is foreseeable that in the coming period, global central banks continue to buy gold to deal with possible geopolitical conflicts or international relations risks, which will become a more normal move."

Wang Lixin, CEO of the World Gold Council China, told the media that gold's traditional anti-risk ability, anti-inflation ability and high liquidity have contributed to the central bank's re-understanding and attention to gold.

The World Gold Council expects central bank purchases to remain strong, and even though purchases may be below their all-time highs in 2022, they could still be the cornerstone of supporting gold demand throughout 2023.

Will the price of gold rise again?

Now the price of gold continues to climb, has it reached its highest point? How long will it go up?

"This kind of thing no one can predict." Wan Zhe said, but the current gold price is based on high volatility, mainly two supporting factors:

First, in the medium and long term, affected by the Ukraine crisis, the tension and fragmentation of the international situation will support gold prices.

Second, the spread of the banking crisis will clearly show the impact on the US economy in the second half of the year, and it will also provide some support to gold prices.

Duan Grace, a precious metals researcher at Dayou Futures, believes that there is still a long time before the macro environment in the United States improves, and factors favorable to gold prices continue to exist. According to historical experience, after the end of the Fed's interest rate hike, the upward trend of gold prices will be further reflected, until the economy shows initial signs of improvement after a period of interest rate cuts, so that the upward trend of gold prices will continue.

According to the CICC research report, gold is expected to record a high increase in 2023. As inflation in the United States falls, it will drive the Fed to slow down the pace of interest rate hikes or even start the interest rate reduction cycle, and real interest rates are expected to continue to fall; Coupled with the current anti-globalization background, the global monetary system is facing profound changes, the purchase demand for gold reserves is systematically rising, and the gold price has entered the right upward channel, which is expected to hit a record high, even reaching the level of $2300-2500 per ounce.