Source: Brokerage China
Author: Xu Xiaoru

On the evening of February 7, Beijing time, spot Gold reached a new high! Following the release of the USA non-farm employment report and the University of Michigan's monthly inflation expectations survey, the spot Gold price surged to $2886.79 per ounce.

Latest data shows that the spot Gold price increased by 0.17%, reporting $2860.63 per ounce. This week, spot Gold has cumulatively risen over 2%. COMEX Gold Futures rose by 0.33%, reporting $2886.1 per ounce, with a cumulative rise of over 1.8% this week.

It is worth noting that against the backdrop of central banks accelerating Gold purchases and investors seeking safe havens amid the threat of tariff escalation, the demand for Gold in 2024 has soared to a new record.

Meanwhile, data released by the People's Bank of China on February 7 shows that China's Gold reserves at the end of January were 73.45 million ounces, an increase from 73.29 million ounces at the end of December last year. This indicates that the central bank has increased its Gold holdings for three consecutive months.

As Gold prices approach $2900, there is much market attention on whether the upward momentum of Gold can continue. Goldman Sachs, which has consistently been bullish on Gold, has unusually issued a warning about short-term Gold prices, predicting a 'tactical decline' if tariff uncertainties diminish and positions normalize.

Guosheng Securities pointed out that US employment is mixed and remains resilient, while expectations for Fed interest rate cuts have been significantly adjusted downward. The recent rise in Gold to new highs can be attributed to three main factors: (1) As expectations for Fed interest rate cuts rebound from the bottom, both the USD and US bond yields have stopped rising and retreated, which is bullish for Gold; (2) With Trump officially in office, uncertainty in the global economy and geopolitical situation has increased, leading to heightened risk aversion; (3) A large amount of Gold has recently flowed back to the USA, causing liquidity in London spot Gold to tighten sharply, driving up Gold prices. The medium to long term outlook remains bullish, with a high probability of fluctuating upward movements this year, and a short-term suggestion to wait for correction opportunities.

Global central banks are accelerating Gold purchases, and Gold demand has soared to a new record.

Notably, central banks around the world continue to accumulate Gold at an astonishing rate in 2024, with accelerated purchases in the fourth quarter. At the same time, total investment demand for Gold is also rapidly increasing, leading to a surge in Gold demand to new records in 2024.

Recently, the World Gold Council published the 2024 Global Gold Demand Trends Report, indicating that total global Gold demand in 2024 reached 4,975 tons, with fourth-quarter demand totaling 1,297 tons, setting new historical highs both annually and quarterly. Global central bank purchases reached 1,045 tons, exceeding 1,000 tons for three consecutive years; 2024's total investment demand grew by 25% to 1,180 tons, reaching a four-year high.

Joe Cavatoni, a market strategist at the World Gold Council, stated that the reasons for central banks buying Gold are "concerns about persistent inflation, geopolitical tensions, and the need for diversified investment portfolios."

Furthermore, the interest rate cut cycle initiated by the Fed last year has prompted global capital to flow into physically backed Gold ETFs, including funds from Western investors, as the lower interest rate environment favors Gold. Demand for Global ETFs remains stable; 2024 is the first year since 2020 wherein holdings have mostly remained unchanged, contrasting sharply with the large outflows of the previous three years.

Huaxi Securities pointed out that as Gold prices reach new highs, whether central bank purchasing behavior changes is worth monitoring. From May to October last year, central banks temporarily suspended Gold purchases, but resumed buying in November and December. If subsequent disclosures show that the central bank continued purchasing in January, it may strengthen market confidence in Gold prices.

Goldman Sachs warns that Gold is facing a "tactical decline."

With gold prices reaching a historic high, there is great concern over whether the momentum of gold's rise can continue.

Goldman Sachs, which has been bullish on Gold, has unusually issued a warning regarding short-term Gold prices. Goldman Sachs believes that if tariff uncertainties dissipate and Hold Positions normalize, a tactical decline in Gold prices is expected. Goldman Sachs anticipates that Gold prices may fall back to 2,650 USD from now.

However, Goldman Sachs also pointed out that continued buying by central banks and the gradual increase in ETF Hold Positions after the Federal Reserve's interest rate cuts will continue to support the prediction that Gold prices will reach 3,000 USD per ounce by the second quarter of 2026.

Regarding central bank Gold reserves, since President Nixon ended the gold standard in 1971, Gold has been a negligible part of international reserves. However, since the Ukraine war, the USA has weaponized financial sanctions against Russia, initiating a new cycle of central bank Gold reserves, leading various central banks and authorities to buy Gold.

Shenwan Hongyuan Futures stated that Gold is expected to maintain a relatively strong running in the near term, generally easy to rise but difficult to decline, although the upward space within the year may not match last year’s performance. Investors need to be cautious when chasing higher prices recently, focusing mainly on a buy-on-dip strategy.

Guangzhou Futures Analyst Tang Shubin stated that the demand for Gold purchases by global central banks exceeds expectations, and the ongoing potential geopolitical and economic uncertainties are Bullish for the performance of Gold and other Precious Metals as traditional safe-haven assets, especially since the Trump administration's policies have brought significant uncertainty to macro sentiment. Supported by safe-haven sentiment, it is expected that Precious Metal prices may maintain relatively strong fluctuations, consolidating after new short-term highs, with attention to buying opportunities on dips.

Invesco Commodity Strategist Kathy Kriskey stated that investors are turning to Gold to protect themselves from geopolitical and global economic uncertainties. The turmoil in the Technology industry is leading many to question stock market valuations, while Gold serves as the ultimate safety net.

As a safe-haven asset, especially central banks seeking to diversify from USD, have increasingly favored Gold. However, Kriskey also advised investors not to chase Gold and other commodities like coffee that hit historic highs.

Editor/Jeffy