Haitong Securities: This round of gold bullish market is mainly due to monetary attributes showing a new pattern

The Zhitong Finance App learned that Haitong Securities released a research report saying that reviewing historical trends since the marketization of gold prices in 1970, it is mainly determined by commodity attributes, currency attributes, and safe-haven attributes. The gold bull market from 1970 to 1980 was driven by both monetary attributes and commodity attributes. It was related to changes in the global monetary system and inflation. The 2001-2011 gold bull market mainly stemmed from commodity attributes. Currency and safe-haven attributes boosted the commodity boom. China's rapid development spawned a commodity bull market. This round of gold bullish market is mainly due to monetary attributes, but it has taken a new form, where the central bank buys gold drastically to optimize the official reserve asset structure. Starting a cycle of interest rate cuts by the Federal Reserve will strengthen the driving force of monetary attributes.

Haitong Securities's main views are as follows:

Gold's three attributes: commodity, currency, and safe-haven

Commodity attributes: In 2023, the commodity demand for gold (49% jewelry +7% industry) accounted for more than half. At this time, gold price trends are directly related to the macroeconomic situation. However, over time, demand for commodities is relatively stable, and the impact on gold prices is relatively small. Moreover, as a physical commodity, gold is similar to other commodities and has obvious anti-inflationary properties. As inflationary pressure rises and commodity prices rise, the price of gold will rise accordingly.

Monetary attributes: Although gold has now withdrawn from the currency circulation basin, gold is still an important reserve asset in countries' international reserves; in the context of anti-globalization, the significance of gold as the ultimate currency will continue to be highlighted.

Safe-haven attributes: When international geopolitical risks escalate or financial market fluctuations increase, investors' risk aversion heats up, and they often tend to allocate gold, which causes gold prices to rise rapidly in the short term. Typical periods include the “911” incident in the US in September 2001, the global financial crisis at the end of 2008, and the Russian-Ukrainian conflict in February-March 2022.

Gold price review for the past 50 years

After 1971, with the decoupling of gold from the US dollar, gold officially entered an era where the supply and demand relationship determined the price. After that, the price of gold experienced a rapid rise in the 70s, a decline in the 80s and 90s, and a long period of sideways fluctuation. After 2001, it once again ushered in a ten-year bull market, and entered a bear market stage in 2011, until a new upward cycle began again after 2018.

The gold bull market from 1970 to 1980 was driven by both monetary attributes and commodity attributes. The overall weakening of the US dollar index and the fluctuating decline in real interest rates continued this round of gold's rise. Structural imbalances in supply and demand caused by the two energy crises in the 70s also led to a sharp rise in commodities, including gold.

The golden boom in 2001-11 was mainly due to commodity attributes. After China joined the WTO in 2001, the economy developed rapidly, and the high demand for global commodities spawned a global commodity bull market. Furthermore, after the bursting of the Internet bubble and the subprime mortgage crisis, global liquidity loosened twice and the US dollar weakened. The occurrence of the “911” terrorist attacks in 2001 also showed the price boosting effect of gold currency and safe-haven attributes.

The logic and outlook behind the new high price of gold in this round

This round of the gold bull market began in 2018. The first half (18/08-20/09) was mainly dominated by safe-haven attributes and currency attributes; in the second half (22 to now), gold prices diverged from high related indicators such as actual US interest rates and the US dollar index. Behind this, against the backdrop of declining US dollar credit, the central bank made large purchases to optimize the structure of official reserve assets, and monetary attributes showed new characteristics. The current round of rising gold prices has continued for 6 years, and the biggest increase in London gold is now 126%. However, compared with the two rounds of gold bullish markets in the 1970s (continued for 10 years, maximum increase of 2346%) and 2000s (continued for 11 years, maximum increase of 640%), there is still a big gap in time and space in this round of gold bullish markets.

Looking ahead to the future trend of gold prices, monetary attributes will be the main driving factor. The Federal Reserve began cutting interest rates in September. The short-term decline in real interest rates will benefit gold and observe the US economic trend in the medium term; in addition, continued gold purchases by the central bank will also benefit the price of gold on a monetary level. In terms of safe-haven attributes, geopolitical uncertainty may be difficult to ease in the short term, which will also support the price of gold. In terms of commodity attributes, the global economic outlook is still weak, and the impact on gold prices is small.

Risk warning: Historical experience does not represent the future, and the global geopolitical situation is highly uncertain.