Soochow: Multiple factors support the bullish trend of gold again in 2025. Focus on positioning opportunities and potential buying points.

Soochow released a research report stating that looking ahead to the gold sector in 2025, in the long term, the core underlying logic of the future US economy experiencing re-inflation will be the implementation of "America First" by the new US government. Before the Fed returns to the rate hike channel, re-inflation will effectively lower real interest rates, thereby pushing up the price of gold assets. The potential selling point for gold is when the Fed decides to continue significant rate hikes, or when the US and major global economies achieve economic recovery and begin monetary and fiscal tightening. Currently, the US and global economies still need a long time to achieve full economic recovery, and are in a period of synchronous loose fiscal and monetary policies between China and the US. The selling point for gold is not visible at this time. The main points of Soochow are as follows: Point 1: Reviewing this year, the traditional pricing framework of gold is not effective, and the essence lies in the growing demand for gold reserves in the backdrop of the lack of sovereign currency credit. In the traditional gold pricing model, the core logic is the inverse relationship between real interest rates and gold prices. In this round of the market, the response of gold prices to the trend of real interest rates has been dulled. From 2022 to the first half of 2024, the weak USD credit led to central bank structural purchases of gold, impacting the relationship between gold and real interest rates, allowing gold prices to withstand the rise in real interest rates. In the long term, the constraints of US debt expansion are difficult to resolve effectively, and central bank demand for gold reserves may provide long-term support for gold prices. Point 2: Looking ahead to 2025, multiple factors support gold to rise again, and there is a good layout window in the first half of 2025. In 2025, the new US government will have a long-term positive impact on gold pricing factors, but short-term downside risks exist. Short-term trend: The new US government's support for its own energy policies may temporarily reduce commodity inflation, and a decrease in willingness to expand overseas influence may have a short-term adverse impact on gold prices. Long-term trend: The implementation of "America First" by the new US government will be the core underlying logic in predicting that the US economy will experience re-inflation in the future. Before the Fed returns to the rate hike channel, re-inflation will effectively lower real interest rates, thereby pushing up the price of gold assets. Emerging markets' gold reserves have further room for growth in 2025. In the context of deglobalization and high economic development uncertainty, central banks in emerging market countries need to increase gold reserves to stabilize their exchange rates and reduce economic volatility. With countries like India and China continuing to increase their gold holdings, it is expected that central banks around the world will maintain a purchase volume of 800-1200 tons per year in the coming years. Global gold ETFs have the potential to further purchase gold in 2025. Global gold ETFs have not seen a sufficient level of net inflows in this current gold uptrend cycle. As of the end of October, net inflows for gold ETFs in this cycle of loose monetary policy amounted to 145 tons, compared to 1500 tons of net inflows in 2019-2020, indicating there is still a significant inflow space. With the initial premium beginning to fade, and with the price of gold falling, gold ETFs saw a net inflow in late November. As the previously mentioned conditions for rising gold prices continue to be verified, the level of ETF fund inflows will significantly increase. Non-commercial long positions in gold are decreasing. In the context of the gold fundamental framework being met, a good buying point for gold will appear when non-commercial long positions drop to 260,000-300,000 contracts. Point 3: The potential buying point for gold in 2025 is to find a time point for going long that is not crowded, based on meeting most of the basic framework conditions. Fundamentally, at the time when the new US government introduces policies such as tariffs and immigration expulsion, inflation in the US is expected to rise again with more certainty. At the same time, it is expected that the new US government will focus on resolving Middle East and Russia-Ukraine geopolitical conflicts early in their term, which will reduce the geopolitical premium on gold prices. To increase manufacturing jobs in the US, in his second term, Trump may actively seek to devalue the US dollar, and the US dollar index is expected to peak in the first half of 2025. The potential selling point for gold is when the Fed decides to continue significant rate hikes, or when the US and major global economies achieve economic recovery and begin monetary and fiscal tightening. Currently, the US and global economies still need a long time to achieve full economic recovery, and are in a period of synchronized loose fiscal and monetary policies between China and the US. The selling point for gold is not visible at this time. Investment recommendations: Due to the difference in duration, the commodity market and the stock market will show different strengths and weaknesses in different stages. In left trading, the trend of stocks tends to be stronger than that of commodities; while in right trading, the trend of stocks tends to be weaker than that of commodities, essentially due to the different durations of the two. Now is the time to position for the expectation of re-inflation in the US. When selecting stocks, the gold sector should prefer targets with a high proportion of gold business revenue and incremental production expectations, such as Shanjin International Gold (000975.SZ) which is expected to have significant production growth in the coming years; and Shandong Gold Mining (600547.SH) with a concentrated main business and high equity resource-to-market value ratio. Risk factors: Intensification of market competition; geopolitical risk; risks of unclear transmission of policies by the new US government; uncertainty regarding the independence of the Fed.