Gold prices are going crazy!

On the 8th local time, gold prices continued their recent rise and hit a record high in the intraday. The New York gold futures price once hit US$4,071.50 per ounce during the European trading session on the 8th, and the London spot gold price once hit US$4,049.43 per ounce, both hitting intraday record highs.

As of 20:25 Beijing time on the 8th, the December gold futures price on the New York Mercantile Exchange was reported at US $4,060.60 per ounce, an increase of 1.40%. Spot gold in London was trading at $4,037.35 an ounce, an increase of 1.35%.

The surge in gold prices caught financial institutions unprepared and raised their target prices one after another. Why is gold price so crazy?

First of all, let's look at short-term factors. The "shutdown" of the U.S. federal government has significantly increased risk aversion in the market. On the one hand, the government's "shutdown" has caused many public services to stall, and the U.S. Bureau of Labor Statistics has suspended the release of all economic data. Once the "shutdown" lasts too long, the US September CPI data originally scheduled to be released on October 15 will also be affected. The result is that key economic data is missing as a reference, and the Fed's monetary policy formulation is like a "blind flight." In this case, the market is betting that the Fed is more inclined to cut interest rates "precautionary" rather than "wait and see" to deal with potential job market deterioration and economic growth slowdown risks. Currently, the market expects the Federal Reserve to cut interest rates in October and December to be a high probability event.

At the same time, the U.S. federal government has frequently fallen into the ¡°stop¡± wave in recent years, and has also to a certain extent shaken the confidence of global investors in U.S. bonds and U.S. dollar assets, instead of increasing the distribution of gold. Since October 1, the U.S. federal government this ¡°stop¡±, the international gold price has increased in five trading days by a cumulative of 3.39%, and has been high innovation. The World Gold Association¡¯s latest study released on September 7 showed that the global physical gold ETF¡¯s cash flow in September and the third quarter of this year had reached a record high. In the third quarter of this year, global physical gold ETF¡¯s capital flow reached $26 billion, of which investors in North America bought $16.1 billion, the largest in all major markets.

In the medium and long term, the global central bank has promoted the diversification of asset allocation and the continuous increase in gold holding, which is the "central" force of the rise of gold prices in recent years.According to the data of the World Gold Association, in the past three years, the annual increase of the global central bank's gold reserves has exceeded a thousand tons, far higher than the previous decade 400 tons to 500 tons of average annual purchase level.

Shan Hui, chief China economist of Goldman Sachs: The difference between gold and other commodities is that, for example, if the price of crude oil is very high, the price will come down after production. But as far as gold is concerned, it will not be consumed, and the annual production is not very flexible. If the central bank wants to allocate more, the price of gold must rise, making others willing to sell their existing gold to the central bank.

Will gold prices continue to rise after breaking through the $4000 per ounce mark?

From the response of the major investors, the answer is basically afirmative, with JPMorgan and Swedbank recently raising the short-term gold target price to $4200 per ounce, and Goldman Sachs expects the price of gold to rise to $4900 per ounce in December 2026. The latest World Gold Association study notes that the share of gold investment by private investors globally has indeed much room to rise. By the end of the second quarter of this year, gold accounted for 24.25% of the global central bank asset allocation, compared to only 2.24% among private investors.

However, it should be reminded that since the beginning of this year, the gold futures price in New York has increased by 51.6%, and the spot gold price in London has increased by 51.8%. The price of gold has risen rapidly recently, accumulating a lot of callback risks. Bank of America's latest research report this week pointed out that speculative positions in the gold market have surged, and the gold price chart has shown obvious "overbought" signals.

Gold is a refuge asset, the overall investment recommendations of the major financial institutions, the share of gold in the households of all kinds of investment objectives in 5% to 15% is reasonable, do not use too much money to blindly speculate on buying and selling gold.

Reporter: Gao Yan