CITIC SEC: Gold breaks new high again, what will be the future trend?

CITIC SEC released a research report stating that the price of gold has reached a new historical high, with London gold breaking through $2900 per ounce, and the tariff actions of the Trump administration are a major driver. By triggering market re-evaluation of the US economic growth and inflation, increasing market risk aversion due to tariff uncertainty, and concerns about market division due to the possibility of increased tariffs on precious metals, gold prices have been pushed up. In the short term, if Trump's tariff policy continues to fluctuate, the price of gold is expected to continue to rise, otherwise the upward trend may come to an end. For the whole year, the optimistic expectations for the price of gold remain unchanged. Events: The price of gold has recently been climbing continuously. On January 30th, London spot gold broke through its previous high and surpassed $2800 per ounce the next day. The price of gold continued to rise, and on February 10th, London spot gold broke through $2900 per ounce. During this period, the price of COMEX gold was higher than that of London spot gold and led to the breakthrough of key points ahead. The Shanghai gold price rose synchronously with international gold, with the overnight Shanghai gold price breaking through 680 yuan per gram on February 10th. CITIC SEC's main points are as follows: The main reason for the current rise in gold prices is Trump's tariff actions causing market concerns. After Trump took office on January 20th, he initially released some practical signals regarding the imposition of tariffs, which slightly improved market concerns. However, unexpected events occurred in Trump's tariff policies. According to reports from Bloomberg and Reuters, on January 31st, Trump signed executive orders imposing different levels of tariffs on imports from China, Mexico, and Canada. On the same day, Trump announced the cancellation of the tax-free threshold for goods imported with a value lower than $800. Then, on February 3rd, after speaking with the leaders of Canada and Mexico, Trump postponed the imposition of tariffs on them for 30 days for further negotiations. On February 7th, during a meeting with Japanese Prime Minister Shizo Abe, Trump announced that he will impose equivalent tariffs next week, applicable to all countries. On that day, Trump also signed an executive order suspending taxes on packages valued below $800. On February 10th, Trump announced a new 25% tariff on all steel and aluminum imports into the US, and Canada and Mexico are the most important importers of steel and aluminum for the US. Trump also stated that he will announce "equivalent tariffs" on Tuesday and Wednesday of the following week (February 11th and 12th), which will take immediate effect. Understanding the rise in gold prices from three perspectives: 1) Inflation and real interest rates. Concerns about Trump's escalation of tariffs for Canada, Mexico, the EU, the UK, Japan, and China have caused a decline in the US dollar's real interest rates since January, as well as a slight increase in inflation expectations, both of which are favorable for the rise in gold prices. 2) Escalating risk aversion. Trump's recent policy reversals have raised high levels of uncertainty in the market, leading to an increase in risk aversion that boosts gold prices. 3) Concerns about the market division in the gold market. In addition to macroeconomic factors, the market is also concerned about the possibility of Trump imposing tariffs on precious metals. This has led to significant expansion in demand for gold stocks on the New York Commodity Exchange and large-scale spot arbitrage trading in the London gold market, becoming the most direct factor contributing to the rapid rise in gold prices. In the short term, as long as Trump continues to be inconsistent with his tariffs, it will still be favorable for gold prices to maintain high levels and break through. However, if the inconsistencies stop and the market expects calmness, the short-term uptrend may come to an end. Compared to market concerns about the imposition of tariffs, Trump's constantly changing attitude on tariffs, making it difficult for market expectations to stabilize, is a more important factor in the rise in gold prices. In terms of tariff intensity, there are significant differences among Trump administration officials on tariffs, with Lutenik being very tough on tariffs, while Bessert is more practical, which may mean that the final tariff intensity may not be as great as expected by the market. However, if Trump continues to make sudden changes, all tariff expectations will be difficult to verify in the short term. Therefore, the theme of the gold market in the short term may still be risk aversion. However, if Trump's current policy reversals are only testing the limits of executive power, and the sudden changes are temporary, if subsequent tariff policies are settled and no longer modified, market expectations stabilize, then the upward trend in gold prices may come to an end. Investment opportunities for the rest of this year need to be monitored. Still bullish on gold for the whole of 2025 Since November 2024, the People's Bank of China has been increasing its gold holdings for three consecutive months. The latest refinancing plan released by the US Treasury Department has not shown a trend of reducing the scale of US debt issuance. Demand from US and European investors to buy gold has rapidly increased, maintaining optimistic expectations for gold prices for the whole year. Additionally, in terms of Middle East geopolitical situations, it is necessary to pay attention to the possibility of conflicts between Iran and Israel under Trump administration intervention, which may further push up gold prices. Risk factors: Trump administration's tariff policies deviating from market expectations, economic growth in Europe and the US exceeding expectations, the Federal Reserve's interest rate cuts progressing slower than expected, global central banks' gold purchases falling short of expectations, US fiscal deficits falling short of expectations, and geopolitical risks.