Financial Focus | Gold prices rise first and then fall. What's the future trend?

Xinhua News Agency, Beijing, May 9 Question: Gold prices rise first and then fall. What's the future trend?

Xinhua News Agency reporters Ren Jun, Chen Yunfu, Bai Yu

Recently, the sharp rise and fall of gold price has affected the market nerves. Due to the high price of gold and the accumulation of wait-and-see sentiment, some gold stores reported that the overall sales of gold jewelry were relatively flat despite the strong promotion during the May Day holiday. What is the future trend of gold price? The reporter made an investigation.

Gold prices remain high

Since March, the international gold price has risen like a rainbow. The gold price in the New York market has risen from less than 2200 dollars per ounce to more than 2400 dollars, an increase of more than 10%.

However, just two weeks ago, the "hot" market for gold went down sharply. On May 8, the gold price in New York market closed at US $2315.8 per ounce, 5.4% lower than the historical high in April.

As a result, the price of gold denominated in RMB also fluctuated significantly. Since late April, AU99.99, the active spot gold transaction in Shanghai Gold Exchange, has continued to fluctuate and fall. On May 9, it closed at 543.43 yuan per gram, 5.8% lower than the historical high of 576.99 yuan per gram in April.

"The gold price has also experienced great fluctuations in the past few years, but not as severe as recently," Xu Zhiyan, assistant general manager of Hua'an Fund and gold ETF fund manager, told reporters.

Although the gold price rose and fell sharply, it was still at a high level. In the four trading days after the May Day holiday, the closing price of AU99.99 on the Shanghai Gold Exchange remained above 540 yuan per gram, up 20% over the same period last year and 13% over the beginning of this year.

It can be seen from the price of gold ornaments. According to the reporter's visit, on May 9, a Chow Tai Fook store in Beijing quoted 710 yuan per gram for gold jewelry, which was lower than the peak of 730 yuan per gram in April. Nevertheless, compared with the quotation of 585 yuan per gram in the same period last year, it is still 21.4% higher.

Due to its low investment threshold (the smallest business unit is 1g), flexible operation, and the ability to purchase a small number of times to share costs, the bank deposit business has been favored by some young gold investors in recent years.

Since the gold price rose in March this year, many banks have raised the starting point of deposit. For example, the Agricultural Bank of China announced on April 9 that it would raise the starting point for the fixed investment of Deposit Connect 2 from 550 yuan to 600 yuan. Since May 1, Postal Savings Bank of China has dynamically adjusted the purchase threshold of gold accumulation business according to the gold market situation, and the adjusted threshold amount is higher than the average closing price of the AU99.99 contract of Shanghai Gold Exchange in the previous calendar month.

Industry insiders remind that investors should grasp the rhythm of accumulation and guard against risks caused by sharp fluctuations in gold prices.

Differentiation of consumer market

"During the short and long holidays, gold jewelry in the gold store can be reduced by up to 60 yuan per gram, which is much cheaper than before the festival." Miss Wang, who bought gold pendants in the Zhoudasheng Gold Store in Shanghai, told reporters.

When the reporter visited, he saw that many gold stores launched promotional activities during the May Day holiday, but some businesses said that gold jewelry consumption was relatively light.

In Shenzhen Shuibei Market, several shopkeepers told reporters that the retail and wholesale market during the May Day holiday was lighter than that after the Spring Festival. "After the Spring Festival this year, the market was hot, and some wholesalers' shops were doing exceptionally good business, and even people couldn't squeeze in. After April, the market turnover fell back," said Long Lilan, director of Zhengsheng Jewelry Marketing.

Compared with gold jewelry consumption, investment in gold bars and gold coins is still hot. The data released by China Gold Association on April 26 showed that in the first quarter of 2024, China's gold jewelry consumption was 183.922 tons, down 3.00% year on year; The consumption of gold bars and coins was 106.323 tons, up 26.77% year on year.

Liu Bao, manager of Guohua Jewelry Gold Investment Department in Beijing, said that during the May Day holiday, the sales of gold bars increased by 30% compared with the same period last year.

According to the analysis of the China Gold Association, the rapidly rising gold price has to some extent suppressed the consumption of gold jewelry, leading to increased sales pressure on gold jewelry retailers. The rise in gold prices also led to the rise in the cost of raw materials for gold jewelry processing enterprises, the decline in shipments, and some small and medium-sized processing enterprises even shut down for holidays. In contrast, the consumption of gold bars and coins with relatively low premium is favored by consumers who have demand for physical gold investment.

"On the whole, the sharp rise and fall of gold prices have caused some gold jewellery consumers to have a wait-and-see mood." Liu Bao said, "If the gold price can continue to stabilize, I believe that the sales of gold jewellery will increase in the future."

More long-term investment

Gold prices fluctuated sharply, and some investors who had been chasing higher in the earlier stage began to suffer losses. "The gold bars bought in late April need to wait at least a while to see the benefits," Han Yu, a white-collar worker in Shanghai, told reporters.

Some investors also choose to sell their long-term gold bars for cash. "Recently, we have sold the investment gold bars purchased in 2019 while the gold price is high," Ms. Huang, who has invested in gold for many years, told reporters.

At the current node, for investors, is it "safe to put your pocket in your pocket" or continue to increase your weight?

Liu Richeng, the current trading manager of Shandong Energy Group, said that the rebound of US inflation data delayed the time point of the Federal Reserve's interest rate cut and short-term investors took profits, which led to the weakening of the short-term upward momentum of gold prices.

The latest data released by the Commodity Futures Trading Commission of the United States also shows that the speculative net long position of gold futures in the New York market has gradually dropped, which shows that investors are not confident of being bullish in the short term.

"In the second quarter, higher gold prices combined with jewelry consumption entered the off-season, and the support of gold prices was not as strong as that in the first quarter," said Lu Weijia, transaction director of Heraeus Precious Metals China.

Xu Zhiyan believes that the Federal Reserve will gradually enter the interest rate cutting cycle in the future, and the global central banks will continue to purchase gold. Geopolitical risks are still continuing. In the medium and long term, gold prices still have the potential to rise.

According to the World Gold Council, the global central bank will purchase 290 tons of gold in the first quarter of 2024, up 1% year on year. This is the highest quarterly data since the quarterly data of global central bank purchases in 2000, 69% higher than the average quarterly amount of central bank purchases in the past five years.

According to the report released by the Office of the Chief Investment Officer of UBS Wealth Management on the 7th, the global gold industry demand in the first quarter increased by 10% year on year, indicating that gold demand is resilient.

"For ordinary investors, investing in the gold market should be more based on long-term investment." Zhan Dapeng, director of nonferrous metals research at Everbright Futures Research Institute, believes that in the long run, the price trend of gold and other assets, such as stocks, is weakly correlated. Overseas investors often invest a certain proportion of assets in gold, on the one hand, play the role of gold as a hedge, On the other hand, the volatility of gold and other assets is used to stabilize the return of the entire portfolio.