Recently, the gold market has been surging, consistently setting new historic highsWith central banks around the world increasing their gold reserves for the third consecutive month, this trend has captured the attention of investors and market analysts alikeAs a consequence, the precious metals sector has witnessed a robust performance, with related thematic funds seeing significant gains since the start of 2025.
Experts from various institutions are highlighting a growing risk aversion in the market, suggesting that gold prices are poised for a new upward volatility cyclePredictions indicate that international gold prices could reach an astonishing $3000 per ounce within the next three monthsThis bullish forecast is further supported by the continuous purchasing activities of global central banks, which are seen as bolstering gold prices.
Since the start of the Year of the Snake, gold buyers have aggressively pushed prices higher, leading to record highs both domestically and internationallyFor instance, as of February 7, gold prices in London and Shanghai reached $2860.09 per ounce and 672.92 yuan per gram, respectively, with both contracts observing a cumulative rise of about 9% since 2025 began.
The year 2024 has proven to be exceptionally favorable for goldAlthough there was a slight decline in prices in the fourth quarter, London gold saw an annual increase exceeding 27%, marking its status as one of the best-performing global assets of 2024, and the most impressive year for gold performance since 2010.
Continuing into 2025, gold bulls have maintained their momentumBy the end of January, London gold once again broke through the $2800 per ounce barrier, surpassing the record set in the previous fourth quarterConcurrently, the prices of gold jewelry surged; on February 9, renowned domestic brands like Chow Tai Fook and Lao Feng Xiang priced their gold jewelry close to 870 yuan per gram.
Industry analysts note a discernible negative correlation between gold prices and U.S. treasury yields over the past two decades
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Gold does not generate interest income, which positions real yield as the opportunity cost for holding goldWhen actual yields decrease, gold becomes increasingly attractive compared to cash and other interest-bearing securities.
Mark Wei, chairman and founder of Mingze Investment, contends that the recent historical record-breaking of gold prices is primarily driven by a combination of factors: escalated global economic uncertainty, frequent geopolitical conflicts, strengthened gold purchases by central banks, and rising inflation expectationsCollectively, these elements enhance the allure of gold as a safe-haven asset.
According to Huazhang Fund, the recent surge in gold prices can be attributed to proposed U.S. tariff policies that may raise the cost of imported goods, thereby heightening inflation risksGold, known for its inflation-hedging capabilities, stands to benefit from this situationFurthermore, tariff-related uncertainties augment economic unpredictabilities, prompting a flow of safe-haven investments into gold.
Huazhang Fund elaborates that in addition to inflation and risk-hedging demands, the U.SFederal Reserve's monetary policies and the continued acquisition of gold by central banks worldwide are expected to provide medium- to long-term support for gold pricesWhile the potential for further interest rate cuts by the Fed exists, the extent of such rate adjustments might not mirror the substantial easing seen in past cyclesHowever, as the U.S. enters a rate-cutting phase, U.STreasury yields are likely to experience a persistent downward trajectory, offering support to gold prices.
As of February 7, the central bank disclosed that China’s gold reserves reached 73.45 million ounces at the end of January, marking the third consecutive month of increased holdingsBy the end of December, reserves were 73.29 million ounces, and in November, they stood at 72.96 million ounces.
The World Gold Council recently published the "Global Gold Demand Trends Report," indicating that central bank gold purchases in 2024 exceeded 1000 tons for the third consecutive year, reaching 1045 tons
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Additionally, global investment demand for gold rose by 25% year-on-year to 1180 tons, hitting a four-year high.
Looking ahead, the World Gold Council projects that demand for gold from central banks will remain dominant in 2025, with gold ETF investments serving as a critical support factor for overall gold demandThe ongoing geopolitical and macroeconomic uncertainties are expected to reinforce gold's role as a wealth preservation and risk mitigation tool.
Huazhang Fund notes that, relative to other economic entities, gold makes up a smaller percentage of China’s international reservesBy the third quarter of 2024, China's gold reserves amounted to 2264.32 tons, accounting for only 5.36% of foreign exchange reserves, highlighting significant room for increased holdingsElevating gold reserves can help optimize the structure of foreign exchange reserves and enhance diversification.
HSBC Jinsheng Fund asserts that the central bank's ongoing accumulation of gold, coupled with uncertainties surrounding the U.S. dollar's exchange rate, are advantageous for gold market performanceHowever, as global inflation cools, and with a significant deceleration in the Fed's interest rate cuts, alongside the substantial increases in gold prices, there may be upward pressure on gold price performanceTherefore, it's anticipated that gold price volatility could be notably greater in 2025, necessitating that investors maintain an awareness of potential short- to medium-term fluctuations.
As gold prices continue to rise, precious metals thematic funds are also seeing impressive performances this yearFunds with significant gold exposure are reporting substantial increases, with more than 90 funds in the precious metals category reflecting profits above 5% since 2025, notably led by Qianhai Kaoyuan Gold and Silver Jewelry and Yongying CSI Hong Kong Gold Industry ETF, both with gains exceeding 13%.
Wind data indicates that as of February 9, 2025, 14 thematic precious metals funds have accumulated gains over 10%. These include Qianhai Kaoyuan Jewelry, Yongying CSI Hong Kong Gold Industry ETF, and Huaxia CSI Hong Kong Gold Industry ETF, all of which have surpassed the 10% increase mark.
Specifically, Qianhai Kaoyuan Jewelry strategically invested heavily in gold stocks throughout 2024, with companies like Shandong Gold, Zijin Mining, and Shanjin International becoming core investments across multiple quarters.
Mark Wei posits that the outlook for gold stock investment opportunities looks optimistic in 2025. The performance of gold stocks tends to closely correlate with gold prices, and as gold prices increase, profits for gold mining enterprises are likely to rise, thereby driving up stock prices
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