Finance Association, April 7 (Editor: Xiaoxiang) This Friday's financial market trends have once again “taught” all precious metals traders a “lesson”: in this extremely special round of gold bullish markets, trading according to traditional macro-central bank policy logic may well lead to bad luck.

International gold prices surged once again this Friday. Spot gold prices rose 1.5% to US$2324.15 per ounce throughout the day, once hitting a record high of US$2330.06 in the intraday period.

Although data released on the same day showed that US non-farm payrolls grew strongly in March, further cooling the market's bet on the probability that the Federal Reserve would cut interest rates in June, the price of gold apparently did not have much negative impact. After a short pullback, it soared all the way up, reaching the 2,300 US dollar mark for the first time in history.

There is no doubt that this trend, as reflected in the history of changes in precious metals prices, is extremely abnormal. Because gold bulls have almost done something unimaginable when trading in the short term — treating changes in the Fed's interest rate expectations as “nothing.”

But in fact, during this round of gold's bull market, this scene actually happened more than once. Perhaps at the end of last year, the catalytic factor for gold prices to initially break away from the low in October last year was probably the driving force behind the market's expectations that the Fed would cut interest rates this year. However, as of the upward logic behind it, the bullish market for gold has actually gone far “off the right”...

According to detailed calculations, in the past 10 days, the price of gold has been rising for 9 days, and in the past 7 weeks, it has been rising for 6 weeks. But at the same time, regardless of the period mentioned above, the industry's interest rate cuts to the Federal Reserve during the year are weakening.

The following few pictures clearly prove just how “abnormal” the current gold bull market is.

The extent of the current discrepancy between the price of gold and the real interest rate in the US is almost something we have seen in the past 20 years.

Meanwhile, the negative correlation between gold and 10-year US Treasury yields has almost completely disappeared — over the past few weeks, gold has been rising along with US Treasury yields.

But the most interesting thing is that while expectations of the Fed's interest rate cuts are getting weaker and weaker, gold is rising more and more insane...

As the price of gold continues to rise, hedge funds and fund managers have now raised their bullish bets on gold to the highest level in 4 years. According to data released by the US Commodity Futures Trading Commission (CFTC) this Friday, the net long positions of hedge funds and fund managers in US gold futures and options soared 13% in the week ending April 2, reaching the highest level since 2020.

So, what is the logical code behind the current rise in gold?

In response, Marin Katusa, founder of Katusa Research, believes that the price of gold reached a new high this week, which is particularly important in the context of heightened geopolitical tension. At the same time, the price trend of gold shows that the rise in this precious metal has surpassed traditional US market sentiment and is playing an attribute of a global currency to a certain extent.

Nicholas Frappell, global head of the ABC institutional market, said that although the Western market may have the incentive to hedge against strong stock markets, the rise in gold was actually mainly driven by global factors, including the demand for diversified investment by central banks in emerging markets and the drying up of seller markets.

Price performance comparisons across markets show that the ratio between gold and the US Treasury Index has now soared to the level of the late 80s of the last century. Investors are beginning to realize that when the price of treasury bonds falls (interest rates rise), the price of gold can actually rise.

However, this situation is actually taking place against the backdrop of the US government's high debt, prominent global de-dollarization trends, continued inflation in various countries, and major central banks beginning efforts to shift their balance sheet allocations to neutral assets with long-term historical reliability, such as gold.

According to the data, by the end of March 2024, the total gold reserves of the top ten countries in the world had reached 24260.63 tons, up 15.58 tons from February, increasing their holdings for 17 consecutive months. The main countries that have increased their holdings include China and India.

Countries are embracing the major trend of gold, which is happening almost simultaneously with the reduction in holdings of US debt:

JuanCarlos Artigas, head of research at the World Gold Council, said in an interview with the media last month that over 70% of the central banks surveyed last year expected that global gold reserves would increase in the next 12 months. Compared to developed markets, emerging markets are more likely to increase their gold reserves because the former's gold reserves are already at a relatively high level. Factors such as interest rate levels, inflation concerns, geographical risk, ESG, and changes in the global economic landscape are all key issues central banks consider first when allocating gold.

In fact, if the current fundamental situation of gold is described as “time, time, and location,” then a year of interest rate cuts by major central banks can be considered “time,” safe haven caused by geopolitical tension in the Middle East, Russia, and Ukraine can be considered “geographical advantage,” while the increase in gold reserves of major central banks, hedge funds, and the gold buying craze of people in various countries can undoubtedly be considered “people and peace.”

Now, even if “Tianshi” (interest rate cut) may be delayed, “geographical advantage” and “people and harmony” seem to be enough to support this wave of rising gold, which is rare in history!

Editor/Somer