In January and February, the two major indicators affecting the Fed's monetary policy were blunted, the market's expectations for the Fed's interest rate cut cooled, and the international gold price further rose in momentum, which was under pressure at the historical high at that time. The annual rate of the US core personal consumption expenditures (PCE) price index and the US unemployment rate in December 2023 were on average the same as the November 2023 data, and the Fed's December 2023 interest rate meeting kept the benchmark interest rate unchanged in the range of 5.25% to 5.5%, the market's expectations for the Fed to cut interest rates were disappointed, and gold prices stalled. In March, although the U.S. price and unemployment rate did not improve significantly, the Fed further released dovish signals, coupled with safe-haven demand triggered by the escalation of conflicts between Iran and Israel in the Middle East, pushed gold prices up with the dollar index. At this time, the U.S. factor was reduced to a secondary factor, and the risk aversion factor became the main factor. The international gold price once again refreshed the all-time high record, reaching $2,450 per ounce. From May to June, the U.S. unemployment rate rose and the core PCE price index retreated, and the international gold price price rose again to $2,450 per ounce, driven by expectations of interest rate cuts. However, in late May, the Federal Reserve meeting minutes unexpectedly turned hawkish, the June interest rate meeting was not moved, the pace of interest rate cuts during the year was postponed again, and the market expectations were disappointed again caused by the bulls' historical high profit-taking pressure to form selling pressure, and the international gold price once again fell into a high-level consolidation situation.
Interest rates may be cut during the year, and gold prices may remain strong
The trend of the Federal Reserve's monetary policy is still the dominant factor in the trend of international gold prices. In the second half of the year, the Fed still has four interest rate meetings, namely July, September, November and December. The latest data on the PCE price index in the United States is 2.6%, although it did not reach the 2% policy target, but it is gradually approaching this target. Therefore, the market generally expects that the price index will fall further driven by high interest rate levels, and the probability of the first interest rate cut this year is relatively high, which is the transition stage of the Fed's monetary policy from the interest rate hike cycle to the interest rate cut cycle. Judging from the statistics of multiple interest rate cut cycles in history, interest rate cut cycles often promote the continuous rise of international gold prices. Since 2001, the Fed has started three cycle of interest rate cuts: from January 2001 to July 2003, from October 2007 to January 2009, and from July 2019 to April 2020. Every cycle of interest rate cuts has been accompanied by a continuous rise in the international gold price. Therefore, from historical experience, the Fed's rate cut cycle may also be a period of growth. Under the credit monetary system, the liquidity continuously released by credit money through loose monetary policy and interest rate reduction policy is the underlying logic that drives the continuous rise of gold prices.
From the perspective of risk aversion, in the era of global stock economy, it is difficult to fundamentally alleviate the game of major powers, trade frictions, and geopolitical tensions in the short term. In order to circumvent the drawbacks of the dominance of the US dollar in foreign exchange reserves, central banks, especially developing countries, have adjusted the structure of foreign exchange reserves by increasing their holdings of gold to varying degrees, and increased the proportion of physical currency guarantees in their own currencies. In the era of asset shortage, gold, as a high-quality asset for asset allocation, has become one of the important choices for investment institutions and high-net-worth customers. The increase in safe-haven demand is also an important support force for the rise in gold prices. To sum up, the international gold price has remained firm even in the past few years under the interest rate hike cycle, and has repeatedly hit record highs, and may continue to rise in the upcoming interest rate cut cycle. Of course, the rise of any commodity is often not a straight line up, and ups and downs in the process of rising are the norm, which requires investors to determine their own investment cycle.
Editor|Jiao Yang Layout|Jiao Yang Vision|Zhang Zongwei
Proofreading|Wang Bei, Reviewing|Zhang Zhenghong, Cui Jinlin