In recent times, the global gold market has experienced unprecedented highs, with prices soaring above $2,440 per ounce in New York and surpassing the $2,480 mark in London. This surge can be attributed to the increasing global economic uncertainties, which have prominently highlighted gold's role as a safe-haven asset.
The World Gold Council's report released in June regarding central banks' gold reserves for 2024 indicates that more than 80% of the surveyed central banks anticipate a continued rise in global official gold reserves over the next 12 months. This steady demand undoubtedly provides a robust foundation for the escalation in gold prices. Since last year, global central banks' purchasing behavior has become a notable factor in international gold price analysis. Wang Jun, the director of the Futures Research Institute of Founder Securities, expressed that central banks are increasing their gold reserves as a strategy to counter the declining credibility of the U.S. dollar amid the ongoing rise in U.S. debts.
The record-setting international gold prices have also positively impacted the Shanghai gold futures market, bringing prices in RMB back to above 580 yuan per gram.
Furthermore, the first half of the year has seen an active trading environment in China's precious metals futures and options market. Data from the China Futures Association revealed that there are currently four categories within the precious metals futures and options sector: gold futures, gold options, silver futures, and silver options. During the first half of the year, the transaction volume for precious metals futures and options reached 233 million contracts, amounting to 35.95 trillion yuan, marking year-on-year increases of 42.07% and 70.46%, respectively.
The commodity market has displayed significant divergence in trends this year. Precious metals and non-ferrous metals, notably copper, have recorded considerable gains, albeit with notable volatility. Oil prices, bolstered by production cuts and geopolitical tensions, have positively influenced the broader chemical sector. In contrast, black metal prices showed weakness, while global agricultural product prices surged before retreating.
The National Bureau of Statistics recently released data indicating that the gross domestic product (GDP) for the first half of the year was approximately 61.68 trillion yuan, representing a year-on-year growth of 5% when adjusted for constant prices. Experts have suggested that while overall economic operations in China have remained stable with a gradual transition and upgrade, there are complexities in the external environment, and domestic demand still has shortcomings. This indicates that the foundation for economic recovery and improvement requires further strengthening. Wang Jun noted that the demand for investment in precious metals such as gold and silver remains strong, alongside increasing consumer income which supports the sustained growth of gold and silver jewelry consumption. Additionally, many consumers are now opting for investment-grade jewelry products. Data issued by the China Gold Association revealed a 5.94% year-on-year rise in gold consumption in the first five months of the year, particularly in the purchases of gold bars and coins, demonstrating a steady upward trend in the overall gold consumption market.
However, in light of high international gold prices, consumer sentiment has shifted towards caution, with factors such as delayed consumption and reduced budgets anticipated to affect the gold jewelry sector somewhat.
Looking ahead, respondents have indicated that expectations regarding the Federal Reserve's interest rate cuts, geopolitical risks, and central bank gold purchases will remain significant determinants in the latter half of the year. Analysts expect gold prices will experience a high-level fluctuation.
Xia Yingying, the director of non-ferrous metals at Nanhua Futures, highlighted that since the end of June, dampened economic performance and employment data from the U.S. have led to increased expectations for rate cuts by the Federal Reserve—this has been a primary driver behind the rebound in precious metals prices. For the remainder of the year, Xia predicts that the demand for safe-haven assets will statistically support gold prices, while the need for investment asset allocations will hinge upon marginal shifts in the Federal Reserve's monetary policy. With expectations for the Fed to enter a rate-cutting cycle later in the year, both gold and silver prices are anticipated to initially fluctuate before gradually ascending.
The report from Founder Securities recommended that investors closely monitor economic data from the U.S. while also being aware of risk events that could introduce a defensively driven market. In a broader perspective, with expectations turning towards a more accommodating Federal Reserve, continuous demand for gold from central banks, and persistent safe-haven requirements amidst global political uncertainties, the prospects for precious metals are promising. In summary, the potential for an increase in precious metals appears more certain, with non-ferrous metals likely to outperform black metals and crude oil prices expected to maintain their strength. The overall commodity market is projected to continue the trend of varied performances seen in the first half, with an expected overall increase in pricing levels.