Guolian Minsheng Securities: The upward trend of gold is unstoppable, optimistic about the boost in industrial demand bringing a silver rally.

Guolian Minsheng Securities released a research report stating that the U.S. economic outlook is under pressure, with strong certainty of interest rate cuts, the U.S. dollar credit entering a downward cycle, ongoing global geopolitical conflicts and trade frictions, central banks and ETF gold purchases continue to support gold prices, driving gold prices higher. Silver has both industrial and financial attributes, with continuous demand for silver in photovoltaics, and bullish on the industrial demand boost bringing a silver price rally. Key points of Guolian Minsheng Securities are as follows: Pessimistic outlook for the U.S. economy, accelerating rate cut cycle The U.S. economic growth remains stable, but demand momentum is weakening, and economic downturn pressures are gradually appearing. Consumer confidence index and personal disposable income growth have been declining since the beginning of the year; investment-side PMI trend remains downward, consistently below the boom-bust line; past employment data is frequently revised downward, unemployment rate has sharply increased, reaching the highest level since September 2021. The Federal Reserve needs to balance the economy with inflation, continuous high interest rates continue to increase fiscal and debt pressure in the U.S., coupled with Trump's interest rate cut demands and the independence challenge brought by the Fed's changeover, the rate cut cycle is accelerating, benefiting gold price increases. Sovereign credit downgrades, central bank gold purchases showing no signs of slowing After the public health crisis, to stimulate economic growth, global countries significantly expanded their balance sheets, impacting currency credit. Looking back at history, gold reserves have a positive relationship with gold prices overall. After the global currency over-issuance in 2020, central bank demand for gold has increased. From 2024, central banks have been buying gold for consecutive three years, exceeding a thousand tons each year, with China's central bank increasing holding in December 25, the continuous purchase of gold for 14 months. With the background of declining credit, global central banks' willingness to allocate gold in their assets is rising, and the central price of gold continues to move upward. Geopolitical conflicts and tariff policies driving safe-haven investments, emerging funds pouring into the market domestically and overseas Since 2025 when Trump took office, geopolitical issues have continued to arise, with the trade protectionist policies represented by "equal tariffs" further pushing global geopolitical and international trade risks to historical highs. The scale of gold ETF holdings and trading activity in various regions has also reached historical highs. In addition, emerging funds such as domestic insurance capital are accelerating their entry into the gold market, injecting new momentum into the gold price increase. Silver: Pricing with dual attributes, focus on the rally Industrial demand accounts for over 50% of silver total demand, with the amount of silver used in photovoltaics increasing significantly in recent years while the growth rate of supply is limited, resulting in an expanding silver supply-demand gap. Silver is priced both with financial and industrial attributes, as an important indicator, the gold-silver ratio usually corresponds to a rise in silver prices when it falls. Looking back at history, the gold-silver ratio generally shows an inverse relationship with PMI. If the subsequent decline in the gold-silver ratio brings about resonance between the financial and commodity attributes of silver, with the industrial demand outlook boosting, silver prices may have more upward elasticity. Risk warning: Overseas geopolitical risks, U.S. inflation exceeding expectations, risks of central bank demand falling short of expectations, etc.