Gold prices continue to fluctuate.

Gold prices have shown a volatile pattern in the short term, affected by the weakening of the US dollar and changes in sentiment due to easing geopolitical tensions.

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2025-02

Top View | Minsheng Securities Qiu Zuxue: Gold prices are expected to break through $3000 in the Year of the Snake

Looking ahead to 2025, Qiu Zuxue stated that there are still many internal and external variables affecting the metals industry. Externally, the uncertainty of the overseas environment and the pace of the Federal Reserve's interest rate cuts are worth noting. "Although the direction of future Fed rate cuts is quite certain, there will always be some fluctuations between reality and expectations regarding the path, magnitude, and pace of rate cuts." "Internally, as the policy tone continues to warm, the continued efforts of policies represented by domestic demand within 2025 are highly certain. At the same time, whether it's fiscal or monetary policy, a friendly 'dual easing' is the general trend." said Qiu Zuxue. Overall, Qiu Zuxue is optimistic about the "spring rally" of the metal sector in the Year of the Snake and recommends that investors pay close attention. "On the one hand, from the calendar effect perspective, the performance of the metal sector in spring is stronger than in other seasons. At the beginning of the year, whether it's credit or economic expectations, the environment is relatively friendly. On the other hand, with continued policy efforts, investors are relatively optimistic about the economic outlook for the whole year, and this will also be coupled with the demand for replenishing inventories in the industrial chain at the beginning of the year." Qiu Zuxue pointed out. Gold prices are expected to break through $3,000 per ounce Regarding gold, which reached record highs in 2024, Qiu Zuxue stated that the core driving factors are twofold: real interest rates and safe haven demand. "Last year's record highs in gold prices were closely related to the market's expectation that the Federal Reserve's monetary policy would turn a corner. In the first half of last year, US nominal interest rates remained relatively high. With the decline in inflation, the Fed's entry into a rate-cutting cycle was quite clear. However, before the rate cuts actually landed, market expectations fluctuated repeatedly." In the second half of 2024, as the Fed officially entered the rate-cutting cycle, nominal interest rates fell. Since expectations for US inflation have begun to fall, the actual US real interest rate is actually going down. Conventionally, when real interest rates fall, it means that the investment value of gold increases significantly. "At the same time, under the demand for safe haven assets, the pace of gold purchases by central banks around the world is still quite rapid. Coupled with the decline in US real interest rates, the combination of these two factors has pushed gold prices to historic highs." Qiu Zuxue emphasized that although gold prices, the US dollar, and US real interest rates showed significant divergence in 2024, the main reason was that under the relatively chaotic and complex external environment, investors had a strong demand for safe haven assets, leading to a significant shift in the weight of factors affecting gold prices. "Overall, I believe that the analytical framework for gold, which is centered on real interest rates, remains fundamentally unchanged." Looking ahead to the Year of the Snake, Qiu Zuxue stated that he remains optimistic about the performance of gold prices in 2025. On the one hand, the Fed has officially entered the rate-cutting cycle, and global monetary easing in 2025 is directional. "On the other hand, the external environment in the next few years will still be relatively chaotic, and the demand for safe haven assets will be strong. From the perspective of asset allocation, the allocation ratio of gold still has room for increase." Gold prices are expected to continue their strong upward trend in 2025. "From an optimistic perspective, gold prices are very likely to break through $3,000 per ounce this year."