GF Securities: Violent fluctuations in gold reflect what information?

GF SEC's research report stated that after the tariff policy is implemented in April 2025, the price of gold has shown intense fluctuations with a sharp increase followed by a decline recently. Overall, the recent surge is mainly driven by escalating trade tensions between the US and China, pressure on the US dollar, a shift in Federal Reserve policy expectations towards caution, and high global risk aversion sentiment. In the medium to long term, the assessment maintains that the structural bull market for gold remains intact, with the momentum to break through historical peak valuations still present. However, in terms of short-term trading, there is a possibility of further decline in prices: technical indicators are overbought, speculative net long positions in COMEX gold have surpassed threshold levels, and market sentiment shows signs of overheating. Based on mean reversion principles, gold is expected to undergo a corrective price adjustment at the monthly level to rebalance liquidity premiums, which is a necessary process after previous short-term driving factors have been overextended. GF SEC's main points are as follows: After the tariff policy is implemented in April 2025, the price of gold has experienced sharp fluctuations recently. Overall, the recent uptrend has been driven by escalating trade tensions between the US and China, pressure on the US dollar, a shift in Federal Reserve policy expectations towards caution, and high global risk aversion sentiment. The underlying logic includes: 1. Long-term support factors include risk aversion demand, where tariffs and geopolitical instability will support gold prices. 2. After the doctrine of US exceptionalism comes to an end and US stocks decline, European and American funds have a strong demand for asset allocation to gold, making gold one of the biggest beneficiaries of this round of US stock market declines. 3. In terms of macroeconomic narratives, there is talk of a collapse of US dollar credit, leading to the structural devaluation of the US dollar (gold being the main asset, alongside Bitcoin, that benefits from a devalued US dollar). Central bank purchases of gold also reflect this reason in a tangible form. Why did the TIPS pricing framework fail? Gold can be approximated as a long-term inflation hedging zero-coupon bond, with the actual interest rate level constituting its implicit cost. However, from the trend point of view, the correlation began to weaken around 2022. Potential reasons include market risk aversion driving gold pricing, reconstruction of the US dollar credit system, changes in central bank gold purchases altering supply-demand structures, and reshaping of market structures by ETF fund flows. Central bank gold purchases & gold ETF holdings: For central banks, gold is considered an alternative to the US dollar, with geopolitical factors driving pricing. Gold is a direct beneficiary of "deglobalization" and "de-dollarization." For the global market, concerns about weak US stocks and a weak US dollar driving gold prices higher are direct results of increased ETF holdings globally. Reconstruction of gold asset prices and future prospects: 1. The pricing logic of gold is likely changing: the gold system is no longer a subordinate to the US dollar system but is gradually becoming a coexisting or even replacement entity. 2. The true signal for asset price reassessment is not in the RMB-USD exchange rate or interest rate paths, but in gold - RMB gold prices, which are new monetary anchors for China. 3. The current RMB gold price is closer to being "Shanghai-led" rather than the original "USD gold price and exchange rate" triangulation result. In the medium to long term, the assessment maintains that the structural bull market for gold remains intact, with the momentum to break through historical peak valuations still present. However, in terms of short-term trading, there is a possibility of further decline in prices: technical indicators are overbought, speculative net long positions in COMEX gold surpass threshold levels, and market sentiment shows signs of overheating. Based on mean reversion principles, gold is expected to undergo a corrective price adjustment at the monthly level to rebalance liquidity premiums, which is a necessary process after previous short-term driving factors have been overextended. Risk warning: There is still significant uncertainty in trade negotiations between various parties, and other economies may make changes to their trade policies towards China; Demand from the US and other overseas economies may deteriorate further; Domestic economic growth and policies to stabilize growth may fall short of expectations.