CITIC SEC: There is a high probability that $4,000 is the bottom zone in this round. It is expected that gold prices will return to an upward channel within the year.

CITIC SEC released a research report stating that although gold prices surged and then quickly dropped this year, gold remains in a major bull market. The reasons include the accelerated expansion of the U.S. fiscal deficit, unbridgeable geopolitical cracks under de-globalization, and continuous gold purchases by global central banks, which provide support. Therefore, the recent drop in gold prices is merely a temporary adjustment within the bull market. The current level of retracement is approaching historical extremes, with the $4,000 per ounce range likely representing the bottom area of this round. Looking ahead, it is expected that the situation in the Strait of Hormuz will shift from suppressing to boosting gold prices, and the Federal Reserve's monetary policy may be more optimistic than the market expects. Coupled with soaring U.S. military spending that increases the deficit, it is anticipated that gold prices will return to an upward trajectory within the year. CITIC SEC's main points are as follows: Gold remains in the major bull market that began in 2015, with three long-term reasons unchanged. 1. Expectations for a rising U.S. federal deficit year after year. Due to increasing military spending, interest payments, and other items, the U.S. federal government's expenditures and deficits are expected to grow almost irreversibly. 2. Geopolitical conflicts are difficult to resolve. The intensification of de-globalization and geopolitical conflicts remains a cornerstone of gold pricing. 3. Central banks continue to purchase gold. According to data from the World Gold Council, central banks have been purchasing large amounts of gold continuously in recent years, with their emphasis on gold increasing year by year. The current round of retracement has approached historical extremes, showing clear bottom characteristics. Gold is currently in the third phase of a major bull market since 1968, and the maximum retracement in each of the three major bull markets has been narrowing. The shift of global central banks to net buyers may be a core reason. Excluding the special retracement scenario in the first round, the maximum retracement in the first two rounds was close to -29%. Directly applying this to calculate the bottom for the current round indicates an international gold price of $3,840 per ounce, which is already close to the current low. Additionally, the six-factor model for gold prices estimates the bottom around $3,970 per ounce under pessimistic assumptions. The conclusions from these two perspectives are consistent: the current gold price is already close to the bottom of this round's adjustment. Reviewing the gold price experience since the beginning of the year, it has undergone four stages, with the core being the clearance of speculative funds. The first stage (January-February) saw expectations of geopolitical conflict significantly boost gold prices; the second stage (March-April) involved the U.S.-Iran-Israel conflict escalating, triggering panic selling of speculative funds, causing gold, viewed as a risk asset, to drop in price; the third stage (April to mid-June) saw the market desensitized to geopolitical issues, with speculative funds refocusing on the AI sector, leading to continued declines in gold prices; the fourth stage (late June to July) indicated that speculative funds were largely cleared, and gold prices were bottoming out. Moving forward, the influence of the U.S.-Iran-Israel conflict on gold is expected to shift from suppression to support. Since July, the negative correlation between oil prices and gold prices has gradually decoupled, and the relationship between the situation in the Strait of Hormuz and gold price trends is reversing. The asset style of gold is shifting from risk assets to safe-haven assets. It remains assessed that the U.S.-Iran-Israel conflict is unlikely to be resolved in the short term; it is expected that after the full clearance of speculative funds, the pessimistic sentiment regarding geopolitical issues may transform back into support for gold prices. The accelerated expansion of the U.S. fiscal policy this year will likely provide stronger support for gold prices. According to the 2027 U.S. presidential budget, the U.S. fiscal deficit may accelerate due to significant increases in military spending this year and next. This is expected to provide stronger support for gold prices. Waller faces multiple pulls, but the Federal Reserve's policy may still be more accommodative than market expectations. It is still judged that Waller's historical statements are oscillating, and his relationship network with Trump leans towards a more accommodative monetary policy. However, during the July FOMC meeting, three voting members opposed raising rates, reflecting internal complex contradictions. Therefore, Waller hopes to bypass the Fed establishment through a working group, but this also implies a complicated reform process. Given the multiple entanglements, the Fed is more likely to remain inactive before the November midterm elections. The markets current pricing for interest rate hikes may be overly pessimistic. Considering the above factors, the outlook for the gold market in the second half of the year remains optimistic, with a greater focus on Federal Reserve dynamics. The upcoming FOMC meeting and the Jackson Hole annual conference before the midterm elections in November are very worthy of attention, as they could signal the start of a gold bull market. The updated six-factor model for gold prices indicates that under neutral assumptions, gold prices are expected to break historical highs early next year. Risk factors: The Federal Reserve's monetary policy may be less than expected, risks of escalating conflict between the U.S., Iran, and Israel, other geopolitical risks, U.S. economic growth exceeding expectations, and the risk of significant fluctuations in the overall financial market.