Recently, the voice of "stocks are falling, but gold is still rising" is spreading on social platforms. But in August and September, when international gold prices hit new highs and are currently competing around $2500, will there really be major investment opportunities for gold in September? What are the bearish factors in the gold market now? Is the prosperity cycle of gold ending?

"Overall, we believe that the strong period of gold is not over yet." A brokerage industry analyst told the Financial Association reporter that although the rumor that "stocks are falling, but gold is still rising" can be understood as a joke, there are still relatively certain investment opportunities in gold ETFs, but short-term volatility needs to be vigilant, especially when the Federal Reserve first lowers interest rates.

In the second half of the year, the overall trend of gold prices is upward and is currently competing around $2500.

Overall, since briefly hitting a low point in June, international gold prices have been fluctuating and rising in July and August, setting multiple historical records.

On June 7th, spot gold fell 1.00% intraday, reaching a low of $2351.78 per ounce, hitting a new low in 2 days. But the situation has basically reversed since then. Starting from July 6th, spot gold reached $2390 per ounce, reaching a new high since May 22nd, and continued to hover above $2500. Early on August 31st, spot gold experienced a brief downturn, falling below $2500 per ounce. However, even at a price of $2500, compared to the performance of $2390 per ounce on July 6th, the price of spot gold in the international market has still risen by $110 per ounce in the past two months, showing strong performance. If calculated at the price of $2351 per ounce in early June, the price of spot gold has risen by $149 per ounce in the past three months.

Looking at the futures market prices, international investors are still optimistic about the future trend of gold in the second half of this year. On the early morning of July 6th, COMEX gold futures rose 1.28%, reaching $2399.8 per ounce, just one step away from $2400. Early on August 31st, COMEX gold fell 0.7%, reaching $2536 per ounce. Calculated in this way, the average increase in COMEX gold futures in the past two months is $137 per ounce, which is significantly better than spot gold. If we add the leverage factor of futures market investors, overall, gold futures investors in the second half of the year, especially July and August, should benefit more.

Entering September, the international gold price is still in a volatile upward trend. On the early morning of September 3rd, COMEX gold futures rose 0.16%, reaching $2531 per ounce. However, on the same day, spot gold rose above $2500 per ounce and then fell back to $2473.36 per ounce, showing intense competition.

Recently, Zhengxin Futures analyst Zhang Jie released a research report stating that in August 2024, the gold price would fluctuate at a high level, with a slight upward shift in focus. "Federal Reserve Chairman Powell at the Jackson Hole annual meeting highlighted the direction of the central banks around the world and the financial markets for its monetary policy, and the future focus of the Federal Reserve's monetary policy will shift from inflation to the job market."

"The strong performance of gold in August is related to the Fed's dovish stance and increased certainty of interest rate cuts. Based on long-term tracking research, the international gold price staying around $2400 is considered a reasonable price, and the current price is still somewhat high." The aforementioned macro analyst at a brokerage also told Caixin reporters.

9月2日，中国银河华立、孙雪琪等人的研报指出，美国劳动力市场超预期下滑，叠加日元套息交易逆转加大了资产价格波动，市场对美国经济衰退预期边际走高，“衰退加以得到强化”。“黄金是美国经济衰退时期理想的资产配置选择，胜率与收益率比较优势显著：复盘历史1973年以来的七次NBER美国经济衰退，黄金在衰退期间相对于其他有色金属大宗商品或其他资产，均具有明显的胜率与收益率优势。”

After a prosperous July and August, will the trend of gold reverse in September this year? At present, there are not a few bearish factors.

Firstly, according to regular reports from multiple gold ETFs, Bridgewater (China), a firm that has consistently held gold ETFs since mid-2022, has sold a significant amount in the first half of this year. For example, at the end of 2023, Bridgewater held 31.59 million shares of E Fund Gold ETF, and in the first half of this year, it sold at least 27.6 million shares. The withdrawal of institutional investors is obviously a major bearish factor for the market sentiment.

Secondly, on August 7, the latest data released on the official website of the People's Bank of China showed that as of the end of July 2024, China's central bank's gold reserves reported 72.8 million ounces (approximately 2264.33 tons), unchanged from the previous month. This is the third consecutive month that the Chinese central bank has halted the increase in gold reserves.

Thirdly, the tense international situation in July and August has improved. The smoke of the Israel-Palestine conflict has gradually dissipated, and the voices of negotiations have become louder, while Iran has not carried out large-scale military retaliation as expected. "If geopolitical tensions ease, it will also lead to some safe-haven funds fleeing the gold market," said the aforementioned analyst.

In addition, based on historical data, for the past 7 years, the price of gold has fallen in September every year, known as the "September Curse" in the international market. Moreover, the data shows that since 2017, the average price decline of gold in September is around 3.3%, which is much lower than the average price increase of 1% in other months.

However, in the opinion of many institutions and industry experts, in September, the trend of gold may still maintain its strength, and the long-term bullish logic of gold is still continuing.

On September 2nd, a research report by China Galaxy Huali, Sun Xueqi, and others pointed out that the unexpected decline in the US labor market, coupled with the reversal of the yen carry trade, has increased asset price volatility, and the market's expectations of a US economic decline have increased marginally. "The gold is an ideal asset allocation choice during the US economic recession, with a significant advantage in win rate and return rate compared to other nonferrous metals, bulk commodities, or other assets during the recession period, based on a review of the seven NBER US economic recessions since 1973."

China Galaxy Huali, Sun Xueqi, and others suggest that Powell indicated at the Jackson Hole meeting that the Fed will start a rate cut cycle in September, and as the rate cut approaches, the price of gold has steadily risen to a new high and has already stabilized at the $2500 per ounce mark. If the subsequent US economic and employment data continue to deteriorate, and the expectation of a US economic decline in the market further strengthens, the performance of gold in terms of win rate and return rate is expected to be significantly better than other assets such as stocks.

Zhengxin Futures also pointed out in their research report that in the medium to long term, with global central banks expected to cut interest rates, the expansion of the balance sheet is expected to strengthen the monetary attributes of precious metals. In addition, with the alternating increase of gold holdings by the Indian industry and the Chinese central bank, as well as the policy agenda of the US two parties in the presidential election pointing to loose fiscal policy and inflation promotion, the long-term bullish logic of gold is still continuing.

Guo Jiayi, from CICC Research, pointed out in a report that historically, the first interest rate cut by the Fed did not have a consistent impact on the trend of gold. The divergence of positions has once again increased, and it may still take time for consolidation before continuing the upward breakthrough. The premium of Shanghai gold to London gold in September and October is expected to rebound.

Editor / jayden