CITIC SEC: Looking ahead to next year, various factors are still likely to dominate the upward trend in the price of gold.

CITIC SEC has released a research report stating that the long-term price trend of gold is highly related to geopolitical and economic situations. The upward drive of gold prices usually comes from geopolitical turmoil and weak performance of the US economy. The downside risks can be summarized into five categories: improvement in the US economy, Fed turning hawkish, strong fiscal discipline in the US, easing of geopolitical tensions, and global central banks selling gold, but currently these risks are not significant. In the long term, gold still benefits from the expansion of global liquidity and preference due to risks brought by anti-globalization. In the near term, fluctuations in gold prices are mainly driven by US-China trade relations and rate cut expectations. Looking ahead to next year, multiple factors are likely to dominate the upward trend of gold prices. The main points of CITIC SEC are as follows: Historically, the long-term price trend of gold is highly related to geopolitical and economic situations. The price trend of gold since 1971 can be divided into three stages. In the 1960s and 70s, the main theme was "attacking the US and defending the Soviet Union": the US suffered setbacks in Vietnam and Middle East diplomacy, the oil crisis and domestic economic issues led to severe stagnation, and the price of gold in US dollars showed a trend of rapid increase. In the 1980s, it shifted to "attacking the Soviet Union and defending the US", as the US built a unipolar order, successfully curbed domestic high inflation, and shifted towards high growth, resulting in a downturn in the central price of gold. Since the 21st century, the US has faced consecutive geopolitical crises and economic and financial crises, causing gold prices to accelerate detachment. Although gold prices are not without downside risks, five factors that could significantly drive down gold prices have been summarized, but these risks are not currently evident: 1. Gold prices generally fall when the US economy improves. However, the current lack of internal dynamism in the US economy and tariff disturbances make it difficult to be optimistic about the outlook for the US economy next year. 2. A hawkish shift in Fed monetary policy could drive gold prices down. There have been many examples in history where a hawkish turn by the Fed has pushed gold prices down. However, looking ahead to next year, it is difficult for the Fed to clearly turn hawkish under the dual pressures of the US economy and politics. 3. A return of US fiscal discipline could drive gold prices down. Historically, a reduction in US fiscal deficits or even a shift to surpluses have been unfavorable for gold prices, but it is expected that the Trump administration will find it difficult to reduce the fiscal deficit. 4. Geopolitical tensions easing could drive gold prices down. Looking ahead to next year, it is difficult to see significant easing of conflicts in Russia-Ukraine and the Middle East. 5. Global central banks turning net sellers constitutes downside risks. Given the current net gold purchase amounts by global central banks and their emphasis on gold, it is difficult to observe a trend of reversal. In the long term, gold benefits from the de-dollarization and re-monetization of gold driven by anti-globalization risks. Both liquidity expansion factors and preference for gold are favorable for the long-term upward trend of gold prices. From a liquidity perspective, the overissuance of credit money systems usually drives gold prices up, and the long-term trend of gold prices can also be explained by the increase in money supply, physical inflation, and financial inflation. From a preference perspective, the current global preference for gold continues to rise, both global central banks and market investors are paying more attention to gold investments. In the future, in a more complex global monetary system, gold, other precious metals, and cryptocurrencies may play more important roles, leading to a long-term upward trend in prices. Recent fluctuations in gold prices are mainly driven by US-China trade relations and rate cut expectations. From late August to late September, gold prices broke out of the range and rose, mainly driven by the Fed's dovish stance and the increase in rate cut expectations. From the end of September to mid-October, US-China trade tensions escalated but later cooled down, driving gold prices sharply up before falling back. The changes in US-China trade relations and the Fed's rate cut path from now to next year are still key factors influencing gold prices, and the main trend of gold prices is still expected to be upward. In the short term, the stabilization of US-China trade relations has temporarily ceased the impact on gold prices, but looking ahead to next year, disturbances are still possible, favoring the upward trend of gold prices. On the monetary policy front, although the Fed may marginally turn hawkish in the near term, under the dual pressures of the US economy and White House politics, expectations for next year are still substantially loose, overall positive for gold. Risk factors: Monetary policy of the Fed is less loose than expected; US inflation is lower than expected; Geopolitical risks are lower than expected; Global economic growth exceeds expectations; Global central banks purchase less gold than expected.