CMSC: It is expected that the price of gold will continue to reach new highs in the future.

CMSC released a research report stating that since October, the price of spot gold in London surged to over $4000 per ounce and reached a historical high of $4059 per ounce during trading, due to the impact of the U.S. federal government shutdown and Trump's announcement of a 100% increase in tariffs on China on November 1st. Gold futures prices also hit a record high during trading, with COMEX gold prices touching $4081 per ounce. Whether from short-term price determining factors such as inflation resistance and risk aversion, or from long-term price determining factors such as currency and finance, it is expected that the price of gold will continue to reach new highs in the future. In the short term, CMSC predicts that the price of gold will continue to remain strong due to risk aversion sentiment. In the medium to long term, three factors will continue to drive the central price of gold upwards. Firstly, global central banks continue to purchase gold to hedge against U.S. dollar credit risk. With the current high levels of U.S. government debt, according to BIS data, the U.S. government's leverage ratio has surpassed 100% since 2019, currently standing at 107.7%. The U.S. government can use the international status of the dollar to levy seigniorage tax globally, lowering its actual debt burden through dollar devaluation. Since the outbreak of the pandemic, the U.S. dollar index has depreciated by 12.8% from its peak. Especially in recent years with the fragmentation of the global economy, U.S. dollar credit is further impacted. Therefore, since the pandemic, global central banks have accumulated a net purchase of 4340.3 tons of gold, with gold reserves now accounting for 22.37% of total foreign exchange reserves, increasing by around 5 percentage points over the past year. This is actually the result of the reactivation of gold's monetary properties after the collapse of the Bretton Woods system. Secondly, global gold ETFs have shifted from net sellers to net buyers of gold. As the price of gold continues to rise, the buying and selling behavior of global gold ETFs has also changed. Since the third quarter of 2014, global gold ETFs have started buying gold. From the 3rd quarter of last year to the 2nd quarter of this year, global gold ETFs and global central banks collectively net purchased 1490.01 tons of gold, equivalent to 34.3% of the scale of global central bank net gold purchases over the past 5 years. This further increases the demand for gold. Thirdly, before the pandemic, the main factor influencing the price of gold was global U.S. dollar liquidity, that is, gold's financial properties. In the interest rate cut cycles by the Federal Reserve since 1980, the U.S. dollar price generally increased, and the price of gold often showed a negative correlation with U.S. bond yields and the U.S. dollar index. Currently, the market expects the Federal Reserve to cut interest rates twice this year, with a total reduction of 75 basis points. Next year, after the change in the Federal Reserve chair, the interest rate reduction may be higher than what is reflected in the current rate dot plot. In other words, the future price of gold will be driven by at least two factors, namely monetary properties and financial properties. Moreover, globalization has led to more complex and unpredictable global situations. Anti-globalization policies will reverse the negative growth trend in prices in China, which is expected to end the downward pressure on prices globally through trade channels. In conclusion, whether from short-term price determining factors such as inflation resistance and risk aversion, or from long-term price determining factors such as currency and finance, CMSC predicts that the price of gold is expected to continue to reach new highs in the future.