Huaxi: Gold demand sets new record, gold prices continue to rise under US tariff policy.

Huaxi released a research report stating that in 2024 Q4, total gold demand (including off-exchange investment) increased by 1% year-on-year, reaching a quarterly high and a total demand for the year of 4974 tons, setting a new historical high. Currently, the frequent changes in tariff policies highlight the "uncertainty" of future US policies, with tariff policies fueling market risk aversion sentiments. This, in turn, has narrowed the decline in the US stock index and US bond yields after a reversal, intensifying market volatility and increasing preference for gold. Additionally, the risk of stagflation in the US economy is becoming apparent, creating a bullish macroeconomic environment for gold prices. On the other hand, the recent shortage of gold bars in the London market, along with the concurrent strength of the US dollar and gold, signifies that gold has become an alternative to US dollar assets. Central bank gold purchases are expected to continue, driving long-term increases in gold prices. Huaxi's main points are as follows: Supply: Total gold supply in 2024 increased by 1% year-on-year to 4974 tons, the highest in nearly 30 years In 2024, total gold supply increased by 1% year-on-year to 4974 tons. This included 3661 tons of gold mine production, an increase of 0.46% year-on-year; producer net hedging -57 tons, a decrease of 184.57% year-on-year; and 1370 tons of recycled gold, an increase of 10.99% year-on-year. Preliminary data shows that gold mine production of 3661 tons is a historical record high. Demand: Total demand for the full year 2024 reached 4974 tons, setting a new historical high In 2024 Q4, total gold demand (including off-exchange investment) increased by 1% year-on-year, reaching a quarterly high, with a total demand for the year of 4974 tons, setting a new historical high. Jewelry manufacturing accounted for 2004 tons, a decrease of 8.53% year-on-year; the technology industry for 326 tons, an increase of 6.82% year-on-year; investment for 1180 tons, an increase of 24.80% year-on-year; and central bank purchases for 1045 tons, a decrease of 0.55% year-on-year. Jewelry: Strong gold prices in 2024 led to a sharp decline in jewelry demand, but the value reached a historical high Due to the continuous rise in gold prices affecting consumers' purchasing power, demand in 2024 Q4 decreased by 12% year-on-year to 547 tons, leading to a total annual demand of 1877 tons (-11%). The last time demand fell below 1400 tons was in 2020 due to the financial crisis, making it necessary to go back to 2009 to find a comparable year for gold jewelry demand. In stark contrast, the sharp rise in gold prices in that year led to a record value of jewelry demand rising to $144 billion (+9%). This pattern is similar in 2024 Q4, with a 12% year-on-year decrease in global demand, dropping to the lowest point in the fourth quarter in four years, while the value reached a historical high of $47 billion. Investment: Global investment in gold reached a four-year high in 2024, driving a remarkable annual return of 26% for gold Gold investment in 2024 grew by 25% annually, the strongest growth rate since 2020, and was mainly concentrated in the second half of the year as rate cuts, geopolitical uncertainties, and gold price performance attracted funds into gold ETFs. Demand for gold bars and coins remained stable at 1186 tons, with the value of this investment increasing sharply by 23% to a record $91 billion. Central Banks: Global central bank demand exceeded 1000 tons for three consecutive years In 2024, central bank demand for gold reached a significant milestone. After increasing by 712 tons in the first three quarters of 2024, central banks purchased an additional 333 tons in 2024 Q4, bringing the total net purchases for the year to 1045 tons. Central banks have extended their continuous gold purchases for 15 years, and it is noteworthy that 2024 is the third consecutive year demand has exceeded 1000 tons, far surpassing the average annual demand of 473 tons from 2010 to 2021, contributing to gold's annual performance. Technology: Technology industry's gold demand reached 84 tons in 2024 Q4, with a 7% increase in total demand to 326 tons in 2024 The strong performance in 2024 Q4 marked the improvement in technology industry gold demand. Demand for electronic products in 2024 was supported by the continued strength in applications related to artificial intelligence and the recovery of the consumer electronics market after a particularly weak 2023. IDC forecasts a 6% increase in smartphone shipments in 2024, mainly driven by the "ultra-aggressive" growth of Chinese suppliers focusing on selling low-end devices in China and emerging markets, leading to a decrease in market share for Apple and Samsung. IDC predicts that despite slowing growth, shipments will continue to increase in 2025. Gartner also reported similar trends in the personal computer and laptop market, expecting demand to continue growing in 2025. Investment Advice Tariff policies continue to escalate. On February 10, local time, US President Trump signed an executive order announcing a 25% tariff on all steel and aluminum imports into the United States. Trump stated that there were "no exceptions or exemptions" to the requirement. Prior to this, on February 1, local time, Trump signed an executive order imposing a 10% tariff on goods imported from China and a 25% tariff on goods imported from Mexico and Canada. Subsequently, on February 3, Trump reversed course and announced a 30-day suspension of tariff measures on both countries to allow for further negotiations. Trump also announced plans to impose tariffs on EU products soon. The frequent changes in tariff policies highlight the "uncertainty" of future US policies, fueling market risk aversion sentiments, while the reversal has narrowed the decline in US stock indexes and US bond yields, intensifying market volatility and increasing preference for gold. Inflation remains resilient, with 2024 Q4 economic data highlighting stagflation risks. Data released on February 12 showed the US January CPI year-on-year at 3%, the largest increase since June 2024, exceeding expectations of 2.9% and the previous value of 2.9%. The US January core CPI year-on-year was 3.3%, exceeding expectations of 3.1% and the previous value of 3.2%. Data released on January 30 showed that the US 2024 Q4 real GDP growth rate year-on-year was 2.3%, lower than expectations of 2.6% and the previous value of 3.1%, indicating a slowdown in economic growth. The seasonally adjusted real personal consumption expenditure rate was 4.2%, well above the expected 3.2%, indicating strong consumer spending.On January 31, the U.S. core PCE price index for December increased by 2.8% year-on-year and 0.2% month-on-month, both in line with expectations. The fourth quarter labor cost index was 0.9% on a seasonally adjusted basis, also in line with expectations, with stable wage growth. The risk of stagflation in the U.S. economy is becoming more apparent, with a favorable macro environment driving gold prices higher.In recent times, the London market has experienced a shortage of gold bars, leading to a long-term increase in gold prices as investors move away from the US dollar. Although Trump has not explicitly stated that he will impose tariffs on gold, the market is concerned about the possibility of new tariffs on precious metals, leading to COMEX gold prices being higher than the London spot market. Arbitrage opportunities have stimulated traders to transport gold to the United States. Since the November 2024 US election, gold traders and financial institutions have transferred 393 tons of gold to COMEX's vaults, leading to a nearly 75% increase in COMEX's gold inventory to 926 tons, the highest level since August 2022. The simultaneous strength of the US dollar and gold indicates that gold has become an alternative to US dollar assets, and central bank purchases of gold are expected to continue, driving long-term increases in gold prices. Gold resource stocks are currently undervalued, and it is recommended to pay attention to the following benefiting companies: Shanjin International Gold (000975.SZ), Chifeng Jilong Gold Mining (600988.SH), Shandong Gold Mining (600547.SH, 01787), Shandong Yulong Gold (601028.SH), Zhongjin Gold Corp., Ltd. (600489.SH), ZHAOJIN MINING (01818), LINGBAO GOLD (03330), Tibet Huayu Mining (601020.SH). Risk Warning: 1) Unexpected changes in the US economy. 2) Changes in the Fed's interest rate cut stance. 3) Unexpected changes in the conflict between Russia and Ukraine and the situation in the Middle East.