Safe-haven demand drives gold prices; beware of a pullback after a surge.
After the results of the US election were released, international gold prices fell from near a record high to around $2537 per ounce before rising again, returning to around $2670 per ounce for several consecutive trading days. During this period, the US dollar index remained strong, with a monthly increase of 3%, currently above 107 points, a high not seen in nearly a year. The US dollar index and international gold prices once again showed a clear trend of rising together.
Time:
2024-11-23 11:28
After the US election results were released, international gold prices fell from near record highs to around $2537 per ounce before rising again, returning to around $2670 per ounce for several consecutive trading days. During this period, the US dollar index remained strong, with a monthly increase of 3%, currently above 107 points, a high not seen in nearly a year. The US dollar index and international gold prices once again showed a clear upward trend together.
Recent frequent risk events have caused the fear index to rise again since November 14, coinciding with the recent upward turn in international gold prices. Safe haven demand can be considered a major reason for the divergence between international gold prices and fundamentals. Whether international gold prices can continue to surge depends on the strength of risk factors and fundamentals.
Trump's ascension to power is unlikely to help resolve disputes and may even exacerbate instability. During the US election, Trump claimed he would resolve the Russo-Ukrainian conflict in the short term after taking office. However, recent developments show that the conflict has not only shown no signs of peace talks due to Trump winning the election, but has instead intensified. Even if Trump intends to resolve the conflict, the current situation suggests that a long way remains before Russia and Ukraine reach an agreement, a far cry from previous optimistic expectations.
While risk factors are pushing up international gold prices, macroeconomic changes also need to be considered. Although in a downward cycle, the US economy has shown considerable resilience. Affected by hurricanes and strikes, the US non-farm payroll increase in October was far below expectations. However, after the short-term impact, the labor market has recovered, with initial jobless claims in the week of November 11 falling to a seven-month low. A significant improvement in November's non-farm payroll data is expected.
In terms of consumption, the US consumer confidence index reached a six-month high in November, and US retail sales in October exceeded expectations. With the Federal Reserve's rate cuts and expectations of Trump's new policies, the US economy has shown a temporary improvement. In contrast, the Eurozone economy continues to be sluggish, with the consumer confidence index turning downward in November and the economic sentiment indicator falling to a six-month low. The European Commission recently released a report lowering its economic growth forecasts for this year and next, stating that the downside risks to the EU economy have increased, including geopolitical risks, trade protectionism, structural challenges within the EU, and natural disasters. With the US strong and the Euro weak, the euro has performed weakly against the dollar, falling sharply for three consecutive weeks, while the US dollar index continues its rebound.
Great power competition is the biggest change in recent years, and safe haven demand has become one of the mainstream views in the world today. Gold, as a natural safe-haven asset, is likely to be an important investment target during most of Trump's term, with an overall upward trend in the long-term price, although fluctuations are inevitable. In the short term, the impact of macroeconomic fundamentals on the upward momentum of international gold prices is relatively limited. Early buyers have already made significant profits, and short-term profit-taking has occurred. Breaking previous highs requires more positive factors, and caution is needed to guard against the risk of international gold prices adjusting again due to short-term fluctuations in risk aversion.
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From the perspective of the international market, the tense situation in the Middle East, the escalation of the Russia-Ukraine conflict, and the continued high uncertainty surrounding the US Trump administration's tariff policies have driven up gold prices due to increased risk aversion in the market. Furthermore, a significant recent change in the gold market is that gold has become the second-largest reserve asset for central banks globally. How should the future trend of gold prices be viewed? Several analysts have indicated that in the short term, gold prices may fluctuate due to factors such as tariff easing and sudden changes in the geopolitical situation; in the medium to long term, gold prices are still in an upward channel.
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Gold prices return to $3300! Wall Street banks show significant divergence in long-term outlook
In fact, as gold prices fluctuate, Wall Street's major banks have recently shown a clear divergence in their views on gold prices. Unlike Goldman Sachs and Deutsche Bank, which are optimistic about gold's performance, Citigroup believes that the long-term outlook for gold prices is not optimistic.
Although gold prices rose this week, market volatility has clearly increased. While the US-UK agreement is symbolic, its content is limited and insufficient to alleviate concerns about a global economic slowdown. Therefore, gold prices will continue to fluctuate between safe havens and policy signals, closely monitoring the Federal Reserve's interest rate expectations and global trade sentiment.