Source: Wind

After two months of sideways consolidation, gold resumed its upward trend in July. As of the closing of July 17 Beijing time 5, COMEX gold and London spot gold have broken through and hit new historical highs. Will there be further momentum to continue rising?

Gold hits new highs again.

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According to Wind Quotation, COMEX gold has risen by 19.39% since the beginning of this year, while London spot gold has surged by 19.68%.

Factors affecting the rise of gold are many.

Multiple factors such as the expectation of interest rate cuts by the Federal Reserve, geopolitical conflicts, consumer demand, central bank holdings, and production decline have continued to drive capital into gold.

Calls for interest rate cuts in September swept the market.

On July 15th local time, Federal Reserve Chairman Powell said at a Washington Economic Club event that the Fed would not wait for the inflation rate to drop to 2% before lowering interest rates. The three U.S. inflation data for the second quarter of this year did indeed increase confidence to some extent, that is, the rate of price increases is recovering sustainably to the Fed's target.

The outside world generally believes that this statement may pave the way for future interest rate cuts, and the Fed's relevant policy discussions may officially begin.

According to the Chicago Mercantile Exchange's Fed viewing tool, after the inflation data was released last week, the likelihood of a rate cut in September soared from 70% to 96%. Such a huge shift in market expectations has created a highly supportive environment for gold, which is traditionally seen as a tool to hedge economic uncertainty and currency devaluation. Lower interest rates lower the opportunity cost of holding non-yield assets such as gold and enhance gold's appeal to investors.

Strong consumer demand.

Under the leadership of the international gold price, continued hedging demand for value preservation has driven investors to turn to physical gold investment. From the first gold dust collection to the end of 2023, humans have extracted about 0.2 million tons of gold. If this amount is measured against the world's 8 billion population, the per capita resource is 25 grams, less than one ounce (31.103 grams).

In addition, increased holdings by central banks in various countries have also boosted gold. According to the World Gold Council's 2024 Central Bank Gold Reserves (CBGR) survey, 29% of central bank respondents plan to increase their gold reserves in the next 12 months, the highest level observed since the survey began in 2018.

Decreased production.

According to data from the International Trade Association, gold production in 2023 increased by only 0.5% compared to a year ago. In 2022, gold production increased by 1.35% year-on-year, and in 2021 it was 2.7%. In 2020, global gold production declined for the first time in 10 years, dropping by 1%.

According to data from the World Gold Council, currently discovered gold deposits are 0.055 million tons. At the recent global production rate of approximately 3000 tons per year, all of the world's available gold deposits will be exhausted in less than 20 years.

Can gold continue to rise?

Goldman Sachs' strategy analyst team pointed out that the upcoming U.S. elections in November may have an impact on the inflation situation, and gold is seen as a good way to deal with this type of uncertainty. Although the results of the U.S. elections have limited direct impact on the price of gold, the uncertainty of the election process and the rising market risk aversion will cause gold and silver prices to rise in the short term.

Bank of America recently predicted that gold prices may rebound to $3,000 in the next 12-18 months.

Citibank's report suggests that the trend of gold consumption growth will improve in 2024, which may push spot trading to a record of $2,400-$2,600 per ounce in the second half of 2024. The target price for gold by mid-2025 under this baseline is $2,800-$3,000 per ounce.

According to the csi commodity equity index strategist at ANZ Bank, it is expected that gold demand in India will be strong this year, and the price of gold will rise to $2,500 per ounce by the end of this year.

Editor / jayden