David Rosenberg (David Rosenberg), a well-known big bear on Wall Street and a famous economist, is optimistic about the trend of gold prices. In a report on Monday, he explained why he believes the price of gold will continue its record bull run, reaching $3,000 per ounce, which means about 29% of potential upside compared to current levels.

Rosenberg pointed out that the central bank of China has been buying gold reserves for 17 consecutive months, and in order for its gold reserves to match the level of other central banks, there may still be plenty of room to buy in the future. “Behind this move is a slow but steady shift from dollar reserves to gold reserves, which has also prompted other central banks to lean back towards gold,” Rosenberg said.

In the past year alone, China has purchased about 181 tons of gold, and is now the sixth largest holder of gold reserves in the world. By March, gold accounted for 4.3% of China's total reserves. However, compared to other central banks, the central bank of China still accounts for a very small share of gold reserves. Currently, the global average is 13%.

This means that China still has a lot of room for maneuver in increasing its gold reserves. “70% of America's reserves are gold. Therefore, the central bank of China will approach the benchmark level of global gold reserves in the next few years, and there is still huge room for improvement,” Rosenberg said. Every 1 percentage point increase in China's gold reserves means an increase of 420 tons of gold is needed, which alone will consume 11% of the new production.

In addition to the central bank of China continuing to buy gold, Rosenberg also mentioned that other factors that may drive the price of gold to reach $3,000 per ounce include the continued escalation of geopolitical tension, increased demand for gold ETFs, and the start of a new easing cycle by the Federal Reserve.

Rosenberg believes that once the Federal Reserve starts cutting interest rates, demand for gold will be boosted. Rosenberg said, “That would be the event that would make $3,000 per ounce possible.” Although due to the resilience of the US economy, the market now does not expect the Federal Reserve to cut interest rates seven times this year as previously anticipated, it is still expected to start cutting interest rates for the first time later this year.

Regarding the recent pullback in gold, institutional analyst Cameron Crise said that the poor performance of gold was understandable, as the increase in gold and silver earlier this month greatly exceeded the “should” increase based on the same drivers. “We can attribute this in large part to the geopolitical risk premium, which declined this week after the Middle East tension failed to escalate further.”

Analyst Garfield Reynolds said that the price of gold recently fell below 2,300 US dollars, giving traders an opportunity to determine how much interest long-term buyers (central banks and institutions, and some long-term investors) are still interested in gold. These buyers are the driving force behind gold's rapid progress this year. As of last Friday, the price of gold has risen 16% since this year, so once it is difficult for gold to regain its glory, then it may prompt some central banks to consider slowing down the pace of purchases. “This week's retracement will be a litmus test for gold”.