The price of gold hit a record high! What factors catalyze it？ Can I still buy it now？

　　Recently, the price of gold has continued to be strong. As of March 5, the closing price of London gold reached a record high of $2,127.6 per ounce, and domestic SHFE gold.The contract reached 498 yuan/gram, approaching the 500 yuan/gram mark.

　　Since 2023, driven by multiple factors, such as the decline of inflation risk in the United States, the advance of the Fed’s interest rate cut expectation, geopolitics and the increase of risk aversion, the price of gold has fluctuated and risen, and it has continuously broken through historical highs in recent years.

　　What factors are driving the price of gold to rise?

　　Four driving forces of gold:Attribute, financial attribute, commodity attribute and risk aversion attribute are the four core driving forces of gold, and also the key influencing factors of gold price fluctuation.

　　In recent years, the change of gold price mainly comes from the reality of American debt.Driven investment demand, hedging demand and the demand of central banks to buy gold.

　　Among them, the US debt is actuallyIt is the anchor of short-term pricing of gold, and the relationship between gold price and US bond interest rate is inversely variable. In the context of anti-globalization, frequent geopolitical conflicts and the wobbling of the US dollar credit system have pushed central banks to continue to purchase gold, and the scale of global central bank purchases has increased significantly in 2021-2023. The active increase of central banks is mainly due to avoiding credit currency risks and diversification of reserve assets, which has become the support of gold prices in the medium and long term.

　　Gold price trend resumption

　　Since the fourth quarter of 2023, the market expects the end of the Fed’s interest rate hike cycle, pushing the gold price back to the rising channel, and the follow-up market mainly fluctuates around the Fed’s liquidity expectations.

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　　From October 2023 to December 2023, the interest rate cut is expected to heat up rapidly, catalyzing the gold price to fluctuate upward. At the beginning of October, the Palestinian-Israeli conflict boosted the demand for safe haven of gold. At the same time, due to OctoberSlowing down, in November, the Fed’s meeting on interest rates was biased, and the end of the interest rate hike cycle was highly certain, which triggered a rapid increase in interest rate cut expectations and triggered gold to enter the rising market.

　　From January 2024 to mid-February 2024, the interest rate cut is expected to fall, which will promote the phased correction of gold prices. Since January, the US economy and inflation data have exceeded expectations, indicating that the economic resilience is still strong, and premature interest rate cuts may trigger the risk of secondary inflation again. Superimposed on the hawkish speeches of the Federal Reserve, the expected rate cut continued to be adjusted back, and the market’s expected rate cut time was moved from March to June, which triggered the strengthening of the US dollar index, the upward interest rate of US debt, and the corresponding adjustment of gold prices.

　　Since late February 2024, liquidity easing is expected to rise, and the price of gold has risen rapidly. On the one hand, American economic data slowed down, with new orders for durable goods in January and ISM manufacturing in February.Both fell short of expectations, and the year-on-year growth rate of per capita disposable income dropped significantly in January. The market bet that the probability of interest rate cuts in June this year will rise. On the other hand, the views of the Federal Reserve are biased. On March 1st, Federal Reserve official Waller suggested that the Federal Reserve should "buy short and sell long" on its balance sheet, so as to push down the interest rate of US debt and the price of gold rose rapidly.

　　Can gold go up in the future?

　　Historically, the emergence of every round of gold bull market is inseparable from the strength of the gold currency attribute, which reflects the changing forces of all parties in the international monetary system. Since 2018, the international geopolitical situation has become increasingly complex. The Sino-US game, the Russian-Ukrainian conflict and the Palestinian-Israeli issue have continued to emerge, and the world has entered the process of "dollarization", which is manifested in dollars.Decline, gold reserves rise. Looking ahead, the price of gold is still rising.

　　Short-term Catalysis-Expectation of Fed’s Interest Rate Reduction

　　It is only a matter of time before the Fed cuts interest rates. In the short term, the interest rate of US bonds has a strong downward trend, which has formed upward support for gold prices. In 2024, the most critical factors affecting the interest rate trend of US debt are the US economy, inflation and the direction of the Federal Reserve’s monetary policy.

　　In the short term, the inflation risk in the United States repeatedly restricts the opening of interest rate cuts. However, under the high interest rate environment, the cooling of the US economy is still the main trend, and the pressure on the supply of superimposed US bonds is eased, and the downward trend of the interest rate center of US bonds is the general direction.

　　In combination with the recent statement of the Federal Reserve’s voting committee that "the eagle will switch to the pigeon", it is only a matter of time before the interest rate cut cycle starts. From the point of view, 4.2%-4.3% or the top range of this round of 10Y US bond interest rate shocks, the US bond interest rate is more likely to enter the downward channel, which will promote the demand for gold investment to heat up. After two rounds of interest rate cuts in 2007 and 2019, the price of gold rose significantly before the Fed cut interest rates.

　　Gold prices have started to rise before interest rate cuts in 2007 and 2019.

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　　Short-term catalysis-geopolitical disturbance in global election year catalyzes central banks to buy gold

　　2024 will be the biggest election year in history. According to incomplete statistics, in 2024, more than 70 countries and regions will hold elections around the world, covering nearly half of the world’s population and nearly 50% of the total economic output, among which the elections in the United States, Russia, Ukraine, India and other places are particularly eye-catching. The regime change and policy adjustment in these countries will bring greater uncertainty and geopolitical friction or increase. Therefore, the increase in demand for safe haven in election year is also continuing to catalyze the purchase of gold by central banks.

The scale of gold purchases by central banks in various countries is at a historical high. Data source:

　　Long-term catalysis: the global monetary system has a trend of "dollarization"

　　Global central banks reduce their holdings of US debt and increase their holdings of gold.Technical spare tire international monetary system, going to the dollar continues to advance. Specifically,

　　Global central banks reduce their holdings of US debt: The scale of foreign investors’ holdings of US debt fluctuates at a high level. The Bank of China has continuously reduced its holdings of US debt since 2014, and the recent reduction has accelerated.

　　Global gold reserve growth: According to the survey of the World Gold Council, the proportion of central banks planning to increase gold reserves in the coming year (24%) is significantly higher than that of central banks planning to reduce gold reserves (3%), and the attitude of central banks in various economies towards the future status of the US dollar is more pessimistic than previous surveys. In contrast, the role of central banks in various economies in the future of gold has become more optimistic. Among them, 62% of the central banks surveyed said that the proportion of gold in total reserves will rise in the future, compared with 42% last year.

　　Potential hegemony over the dollarImpact:Decentralization through technology may become an alternative to the future international monetary system, but the system still needs to be improved.

　　Long-term catalysis: debt crisis drives gold to rise

　　Historically, the European debt crisis has catalyzed the upward trend of gold prices. At present, the leverage ratio of countries around the world is at a historical high. During the European debt crisis, the market became increasingly worried about the sovereign debt risks of European peripheral countries, and the stability of the euro system was in doubt, and funds poured into gold, which rose sharply. The leverage ratio of government departments in major countries in the world is at a historical high, and the leverage ratio of residents and non-financial enterprises in some countries is under high pressure, and the global debt cycle is blocked and long.

　　The downgrade of U.S. sovereign rating is favorable for gold: Fitch’s downgrade of U.S. sovereign rating indicates the future financial pressure and debt default risk of the United States. As a super-sovereign currency, gold is expected to gain excess returns in the upward stage of U.S. sovereign credit risk.

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