China Securities Co.,Ltd.: Gold prices and the Nasdaq rise and fall together, or not last long. The future market of US stocks focuses on fundamental data.

China Securities Co., Ltd. released a research report stating that since November, the price of gold and the Nasdaq have risen and fallen together several times. Both belong to safe-haven and risky assets, and their correlation has increased, causing concerns about deeper level risks. It is unlikely that the liquidity impact in the currency market is the main reason. Recently, with disturbances at the end of the month and factors such as the U.S. government shutdown subsiding, funding rates have fallen and pressure has eased marginally. The main factor behind this may be concerns about Federal Reserve tightening in the anticipation of economic recovery. Changes in the direction of the Fed's policy often lead to a unified trend in major asset classes in the short term. Recently, with the expectations of economic recovery and re-inflation (tax cuts, rate cuts, trade easing, etc.), the convergence of rate cut expectations and the questioning of debt financing for tech companies, both gold and the Nasdaq have been under pressure, leading to an increase in correlation. Therefore, there is no need to worry about a larger underlying crisis for now. After the adjustment, the co-movement of the two assets may not be sustainable. Future attention should be placed on fundamental data trends. If improvement is confirmed, the price of gold may face obstacles in the short term while the risk for U.S. stocks is not great; conversely, stock market volatility may continue. The main points of China Securities Co., Ltd. are as follows: Since November, there have been multiple instances of gold and the Nasdaq rising and falling together. Due to both assets being classified as safe-haven and risky assets, the increasing correlation between them has raised concerns about deeper level risks. For example: on November 4th, the Nasdaq fell by 2%, while gold fell by 1.8%; on November 10th, the Nasdaq rose by 2.3%, while gold rose by 2.8%; on November 13th, the Nasdaq fell by 2.3%, while gold fell by 0.6%; on November 17th, the Nasdaq fell by 0.8%, while gold fell by 1.6%. In fact, the above phenomenon is not limited to just gold and the Nasdaq, as the overall convergence of major asset classes has increased recently. By selecting common global assets such as stocks, bonds, and currencies, and calculating their correlation levels, it is shown that since October, the overall positive correlation level of these assets has continued to rise. After November, it reached a historically high level from the past two years, and remained above historical averages. Therefore, the co-movement of gold and the Nasdaq may not be an isolated phenomenon but a more widespread one. The liquidity impact from the tightening of the currency market and the rise in funding rates are unlikely to be the main reasons. In the first week of November, U.S. stocks started to adjust, and gold was not spared. The market generally attributed the reason to a liquidity crisis at the time, as short-term funding rates saw a significant increase, with the government shutdown causing a surge in fiscal deposits and a sharp drop in commercial bank reserves. However, daily fluctuations in short-term rates are unlikely to trigger a sell-off in other major asset classes, and starting from the second week of November, funding rates have returned to stability, the government has reopened, and the pressure on reserves is likely to ease. Therefore, explaining the convergence of gold and the Nasdaq with insufficient liquidity has its flaws. The main factor behind this may be concerns about Federal Reserve tightening in the anticipation of economic recovery. Based on the economic fundamentals, the driving forces for gold and the Nasdaq are normally in opposite directions. To find the factors that cause them to move together, one most likely needs to look at a higher level of policy dimension. Changes in the direction of the Fed's policy often lead to a unified trend in major asset classes in the short term. Reviewing the correlation between gold and the Nasdaq, changes in Fed rate cut expectations, and the driving factors behind the Fed's changes so far this year, it can be seen that: (1) From the beginning of the year until April: due to tariff impacts and rising recession expectations, the expectations of a Fed rate cut increased, favoring gold. However, because tariffs had a large impact on multinational tech companies, which in turn affected the tech sector negatively, leading to a negative correlation between the Nasdaq and gold. (2) Second quarter: with minimal impact from tariffs and market expectations shifting towards a soft landing, the expectations of a rate cut decreased. As there were no expectations of recovery or tightening, the policies had little influence on the Nasdaq and gold, each following their own logic with a negative correlation. (3) Third quarter: as the job market rapidly deteriorated and recession expectations rose, the expectations of a Fed rate cut strengthened. This round of easing was due to weakening employment, and tech companies had little correlation with the job market. Therefore, both the Nasdaq and gold benefited from the lowering of rates, leading to a clear increase in correlation between the two. (4) November: with the emergence of expectations of economic recovery and re-inflation (tax cuts, rate cuts, trade easing, etc.), the expectations of a rate cut tightened. In addition to recent questioning of debt financing for tech companies, both gold and the Nasdaq experienced negative pressure, increasing their correlation. If the above understanding is correct, the recent rise and fall of gold and the Nasdaq may not necessarily reflect a deeper liquidity crisis or other risks. After the market adjustment, the situation of both assets moving in the same direction may not continue for too long. Future attention should be focused on the trend of fundamental data: if improvements are confirmed and the recovery trade continues, the upward breakthrough of the price of gold may face obstacles in the short term, and the overall risk for U.S. stocks is not significant; on the other hand, stock market volatility is likely to continue.