Financial Associated Press, January 22 (Reporter Li Lujia)The international gold price keeps rising, which coincides with the traditional gold consumption peak season before the Lunar New Year. From 2023 to before the Lunar New Year, the overall gold market is strong. As of January 20, the international gold price has risen by more than 5% this month, nearly 100 US dollars/ ounce.
However, from the perspective of the domestic market, data show that domestic investors’ interest in gold ETFs is “tepid”. For example, according to the China Gold Association, in 2022, the national gold consumption will be 1001.74 tons, a decrease of 10.63% compared with the same period in 2021. Among them: 654.32 tons of gold jewelry, a year-on-year decrease of 8.01%; 258.94 tons of gold bars and gold coins, a year-on-year decrease of 17.23%; 88.48 tons of industrial and other gold, a year-on-year decrease of 8.55%.
Does the above situation indicate that gold has become less attractive for allocating funds? Or is the pre-allocated funds “rising and selling” at the current relatively high gold price?
Image source: The World Gold Council has analyzed that in 2022, investors’ tactical strategies will be the main driver of China’s demand for gold ETFs. Although the strength of the RMB gold price has contributed positive returns to the asset portfolio of many investors, some investors regard the rise of the RMB gold price as a profit opportunity; other investors take advantage of the decline in the gold price to build positions or increase their holdings of gold. All in all, changes in China’s gold ETF holdings in 2022 show a negative correlation with domestic gold prices. But looking forward to the market outlook, the Huaan Fund Index and Quantitative Investment Department stated that in the medium and long term, as inflation falls from high levels and the probability of economic recession increases, the logic driven by gold will gradually change from stagflation to recession, and central banks and institutions in various countries may increase gold allocation. , the value of gold allocation gradually increased. Based on the above analysis, combined with the current fundamental situation, the Huaan Fund Index and Quantitative Investment Department remains optimistic about the value of gold investment.
Gold prices are on the strong side
At a time when the global economic outlook is still uncertain, gold, as a traditional safe-haven asset, is “shining brightly”.
Poor U.S. economic data released this week, and hawkish speeches from Federal Reserve officials also exacerbated concerns about an economic recession. Boosted by factors such as the weakening of the dollar and safe-haven demand, international gold prices rose again this week, and New York Mercantile Exchange gold rose again. Gold futures for February delivery, the most active in the futures market, rose 0.24% to close at $1,927.7 an ounce. As of January 20, the international gold price has risen by more than 5% this month, reaching nearly $100 per ounce.
Liu Chenye, a precious metals researcher at Donghai Futures, said that for most of last year, the price of gold and the U.S. dollar index showed a significant negative correlation. Since November last year, the U.S. dollar index has peaked and fallen, pushing the price of gold higher. The main logic behind it is that the market expects the Fed to slow down interest rate hikes . From the perspective of capital, futures market management funds have increased long orders and significantly reduced short orders. As of last week, the net long orders of COMEX gold futures management funds have increased by more than 100,000 lots compared with early November last year, of which long orders increased by about 38,000 lots. Empty orders decreased by about 65,000 lots.
After the recent rise, the price of gold seems to be getting closer and closer to $2,000 an ounce. If U.S. bond yields and the dollar continue to fall in the future, it seems that it is only a matter of time before the price of gold breaks through this mark. The industry generally believes that the global economic outlook, the relative weakness of the US dollar and the diversion of funds are the reasons behind the recent strengthening of gold prices.
On the one hand, last year’s Fed’s aggressive interest rate hikes and the inflow of safe-haven funds pushed the U.S. dollar index soaring. It fell below the 102 mark.
On the other hand, from the perspective of the economic cycle, the easing of the Fed’s interest rate hike usually occurs in the context of the economic cycle shifting from stagflation to recession. “.
Image source: World Gold Council From the perspective of the commodity market, with the slowdown of the U.S. economic growth, copper and crude oil are likely to experience a round of decline after interest rate hikes. However, the mid-term performance depends on the global economic situation, the strength of the US dollar index and other conditions.
There is still configuration value in the market outlook
Although global gold is priced overseas, especially by pegging to the U.S. dollar, most domestic investors still pay attention to and trade in RMB-denominated gold.
However, from the perspective of the domestic market, in the context of the steady rise in international gold prices since early November last year, data show that domestic investors’ interest in gold ETFs is “tepid”. For example, according to the China Gold Association, in 2022, the national gold consumption will be 1001.74 tons, a decrease of 10.63% compared with the same period in 2021. Among them: 654.32 tons of gold jewelry, a year-on-year decrease of 8.01%; 258.94 tons of gold bars and gold coins, a year-on-year decrease of 17.23%; 88.48 tons of industrial and other gold, a year-on-year decrease of 8.55%.
In fact, under the combined effect of the radical monetary policies of many major economies in the world and the strong safe-haven buying of the US dollar, investors’ interest in gold ETFs, futures and over-the-counter investments has indeed weakened. Among them, as of the end of 2022, the total holdings of China’s gold ETFs totaled 51.4 tons (about 3 billion US dollars, 21 billion yuan), and the inflow in December was 0.9 tons (about 53 million US dollars, 369 million yuan). China’s gold ETF holdings decreased by 24 tons (about 1.4 billion US dollars, 9.8 billion yuan) throughout the year, the largest annual outflow in history.
Some analysts pointed out that in 2022, investors’ tactical strategies will be the main driver of China’s demand for gold ETFs. Although the strength of the RMB gold price contributed positive returns to the asset portfolio of many investors, some investors saw the rise of the RMB gold price as a profit opportunity; other investors took advantage of the decline in the gold price to build positions or increase their holdings of gold. All in all, changes in China’s gold ETF holdings in 2022 show a negative correlation with domestic gold prices.
However, the official reserve asset form published on the official website of the People’s Bank of China previously showed that since November 2022, gold holdings have been increased significantly for two consecutive months, and this increase in gold holdings is the first time in nearly three years. Since September 2019, the central bank’s gold reserves have been 62.64 million ounces, equivalent to about 1948 tons. After two holdings increase at the end of last year, it is now 64.64 million ounces, about 2010 tons.
In fact, many institutions currently emphasize that the market’s preference for precious metals is on the rise. The previous situation of continuous reduction of gold ETFs has gradually changed, and the global central bank’s increase in gold holdings has also increased recently. Therefore, overall In the future, gold is still an asset category worth allocating at present.
Among them, compared with investing in physical gold, gold ETFs are very convenient to trade on-site, and have strong liquidity and low threshold. In addition, low transaction costs are a major advantage of gold ETFs, because gold ETFs do not require storage fees, storage fees and insurance fees, and the advantages are very prominent.
In the Four Seasons Report released by Huaan Yifu Gold Trading Open-end Securities Investment Fund on January 20, it stated that looking forward to the first quarter, due to the significant decline in high-frequency rent and employment data, it is expected that the resilience of rent and wage inflation will continue to rise. Continue to decline, the US CPI year-on-year reading is expected to fall further. The current PMI in Europe and the United States has been below the line of prosperity and decline for many consecutive months, and the pressure of economic recession has increased. It is expected that the Fed will turn dovish marginally under the background of falling inflation, which will benefit the international gold price. We believe that the U.S. dollar index will hover at a low level, and U.S. bond interest rates have also entered the peak range. In the first quarter, the combination of economic recession and the Fed’s marginal dove conversion was the core driving logic of gold, and its safe-haven value has gradually attracted the attention of central banks and investment institutions around the world.