Gold Price Upside Momentum May Slow: Citic Securities Research Report Highlights Potential Risks

Gold Price Upside Momentum May Slow: Citic Securities Research Report Highlights Potential RisksCitic Securities' latest research report suggests that the recent surge in gold prices may be unsustainable. The report analyzes several factors, concluding that the upward momentum could face headwinds in the short term, potentially leading to a correction

Gold Price Upside Momentum May Slow: Citic Securities Research Report Highlights Potential Risks

Citic Securities' latest research report suggests that the recent surge in gold prices may be unsustainable. The report analyzes several factors, concluding that the upward momentum could face headwinds in the short term, potentially leading to a correction.

Firstly, the report highlights the relationship between gold price increases and real interest rates. When the rise in gold prices exceeds the explanatory power of real interest rates by approximately 8%, a pause in the upward trend may occur. This implies that if gold prices rise too quickly, outpacing the support provided by changes in real interest rates, it suggests the price may have already priced in future gains, increasing the risk of a correction. This analysis emphasizes the inherent balancing mechanism in gold pricing, where market prices ultimately need to align with fundamental factors such as real interest rates. Excessive increases often lead to adjustments.

Secondly, the report cites the predictions of a US debt model. The model shows that the current gold price has exceeded the upper bound of its 95% prediction interval. This means that the gold price has significantly deviated from the model's prediction, indicating an overvalued state. The deviation of the model's prediction interval, typically based on historical data and economic indicators, from the actual situation suggests that the current gold price may incorporate an excessively high risk premium, increasing the likelihood of a future decline. This analysis advises investors to carefully assess the rationality of the current gold price and avoid blindly chasing higher prices.

Thirdly, the report analyzes the impact of central bank gold purchases on gold prices. The research finds a significant negative correlation between the pace of central bank gold purchases and gold price movements. This means that after a significant price increase, central banks often do not choose to continue buying at higher prices, but may instead adopt a counter-cyclical strategy, such as reducing purchases or even selling gold to stabilize prices. This negative correlation indicates that central banks play a crucial role in gold price regulation, and their actions can significantly impact market expectations and price trends. This analysis emphasizes the impact of macroeconomic regulatory factors on the gold market and advises investors to monitor central bank policy movements.

Furthermore, the report mentions the supply and demand situation in the US gold market. The report suggests that based on signals such as spreads, positions, and inventories, the supply and demand situation in the US gold market is not optimistic. The description of "US import grabbing and short-covering by longs" suggests that there may be excessive speculative activity in the market, increasing price volatility and the risk of a correction. This analysis cautions investors to be wary of potential market risks and avoid losses due to market sentiment fluctuations.

Finally, the report suggests that investors could consider a "long gold & short bitcoin" hedging strategy. This indicates that gold and bitcoin, as two different asset classes, have a certain degree of correlation in their price movements, and a combined investment can reduce investment risk. However, it should be noted that this strategy is not an absolute risk-avoidance guarantee and still requires dynamic adjustments based on market conditions.

In conclusion, Citic Securities' research report believes that the sustainability of the short-term gold price increase is subject to considerable uncertainty. Factors such as real interest rates, debt model predictions, central bank gold purchases, and the supply and demand situation in the US gold market all suggest that gold prices may face downward pressure. Investors should cautiously approach market risks and invest rationally.