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Financial Investment News reporter Chen Yuhe
After hitting an all-time high of $2,450.1 per ounce on May 20 this year, the price of international spot gold has entered a state of decline, and has fallen by more than 6% so far.
At the same time, topics such as "gold prices fell by 6% from their peak" and "gold prices hit the biggest decline since August 2021" have become the focus of heated discussions in the market. So, why is the price of gold falling? Can it rise in the future? This has also become a concern for the market.
Mapping Qing Zixiu Data source: Wind
Gold prices fell more than 6% during the phase
After falling below the $2,300 mark on June 26, the international spot gold price fell to a low of $2,296.2 per ounce on June 27.
As of press time, the international spot gold price hovered around $2,300.5 per ounce, down more than 6% from a new high of $2,450.1 per ounce. Judging from the price changes of spot gold (AU9999) on the Shanghai Gold Exchange, the latest closing price on June 27 was 543.88 yuan / gram, compared with the 578 yuan it touched on May 20, a decline of about 6%.
Source: Wind
During this period, the price of grammage gold in domestic gold stores also fell significantly.
On June 27, the price of grammage gold for Chow Tai Fook, Saturday Fook, Luk Fook Jewellery and Chow Tai Sang dropped to 708 yuan from 713 yuan the previous day. On May 20, the price of these gold shops was mostly around 743 yuan, and the price of some gold stores was even as high as 746 yuan.
"Now that the price has been reduced, it is indeed more cost-effective, and more people have come to buy it than before. However, we believe that gold prices are likely to continue to rise. In a gold store in Chengdu's Chunxi Road business district, its staff told reporters.
As for the recent decline in gold prices, in some opinions, the reduction of the Fed's interest rate cut forecast at the June FOMC meeting may be one of the reasons for the retreat in gold prices from their highs. In addition, after the gold price hit a record high, the pace of gold purchases by central banks has slowed down significantly, which has also had a certain impact on gold prices.
Huatai Securities analysis said that the recent volatility of gold prices has intensified, and the logic of gold trading is more dependent on the impact of actual economic data and the Federal Reserve's relevant statements on interest rate cut expectations, therefore, gold prices may continue to fluctuate in the short term. At the same time, at the beginning of July, the U.S. macro data will be released intensively, and this period may be an important node for gold prices to break through.
The reporter of the Financial Investment News noticed that some institutions are still bullish on gold prices. First, because global central banks still have a tendency to continue to increase their holdings of gold; second, economic uncertainty and global geopolitical tensions; Third, it is reported that the 50-year agreement with the United States petrodollar has expired, and the process of "de-dollarization" continues. Gold will still be welcomed by investors due to its multiple characteristics such as risk aversion and anti-inflation.
Goldman Sachs expects gold to rise to $2,700 an ounce by the end of the year. In Goldman Sachs' view, there are three main reasons: in terms of central bank and household allocation demand, due to the strong demand for gold from emerging market central banks and Asian households; In terms of geopolitical and tariff risks, holding a long position in gold can also help hedge against the risk of falling equity prices; On the fiscal and monetary risk front, gold could rise by around 15% if US CDS spreads widen by one standard spread against the backdrop of potentially heightened concerns about US debt.
Guosheng Securities said that the global "de-dollarization" process has accelerated, and gold has also formed a direct game relationship with the US dollar, which has promoted the continuous growth of global physical gold demand. In the medium and long term, the continuation of the high interest rate environment may amplify the downward pressure on the economy; As a substitute for non-US assets, gold's safe-haven attribute will gradually become prominent when the downward pressure on the economy heats up. Gold prices will benefit from the two-line logic of the Fed's interest rate cut space and safe-haven premium for a long time, and continue to be optimistic about the pivotal elasticity of gold prices under the logic of dollar asset substitution.
Wanlian Securities said that in the medium and long term, the credit of the world monetary system led by the US dollar has decreased, and the gold reserves of emerging economies have a large gap compared with Western countries.
You can still keep an eye on the opportunities
The fluctuation of gold prices has also affected the relevant listed companies in the A-share market.
Wind data shows that as of the close of trading on June 27, the share prices of 11 gold stocks have fallen, but the overall decline is within 5%. Yulong, Hunan Gold and Western Gold fell by 4.46%, 3.03% and 2.99%, respectively. Among the gold and jewelry stocks, Laishen Tongling, Pengxin Resources, Chaohongji and other stocks were among the top decliners, falling by 5.01%, 4.14% and 3.45% respectively.
Source: Wind
In terms of funds, five gold-backed ETFs fell by around 2%. Among them, the smallest decline was the ChinaAMC Fund Gold Stock ETF, which fell by 1.81%; The biggest decline was in the Win Fund Gold Equity ETF, which fell 2.7%.
However, in the context of the overall pullback, some gold, precious metal-related listed companies are still optimistic about some institutions.
Galaxy Securities believes that the U.S. composite PMI and other data are better than expected, resulting in a sharp drop in gold prices, but judging from more recent data, U.S. inflation and employment data are still gradually weakening, which will make the market's expectations for the Federal Reserve rate cut re-heated and drive gold prices higher. It is recommended to pay attention to individual stocks such as Shandong Gold, CICC Gold, Yintai Gold, Chifeng Gold, and Hunan Gold.
Hualong Securities said that the Fed's next move will still be anchored by the main economic data, following the changes in indicators and adjustments, precious metals may fluctuate upward. It is recommended to pay attention to Shandong Gold, Zijin Mining, Tongling Nonferrous Metals, China Molybdenum, Western Mining, Chifeng Gold, etc.
The gold jewelry sector has also attracted the attention of some institutions due to its dual attributes of "consumption + investment".
Wanlian Securities believes that the rapid rise in gold prices has suppressed the consumer demand for gold jewelry, and the sales of gold jewelry have declined in the short term. However, once the price of gold rises is a consensus expectation, gold jewellery sales are expected to bottom out in the future. In terms of specific stocks, Huaxi Securities recommends paying attention to Chao Hongji, Lao Fengxiang, Zhou Dasheng, Zhou Tai Fook, Caibai shares, etc.
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