Guangzhou Securities: The favorable factors that support the long-term gold price are still in place.

Lu Zhiheng, chief economist of Guotai Junan Securities, said that in the long term, the favorable factors supporting the price of gold are still present. The current sharp decline in gold is not a signal of the end of the bull market, but a deep correction in the upward trend. Firstly, the normalization of global geopolitical risks, Trump administration's foreign policy has led to an increase in conflict frequency and chain reactions, which will continue to weaken the credibility of the US dollar. Secondly, non-US central banks still have a strong appetite for gold purchases, which is expected to continue to push up the price of gold. In the new normal of geopolitical risks, increasing holdings of gold has become an important choice for non-US central banks to respond to sanctions risks and enhance financial security. Emerging market central banks are particularly active, and there is still a large room for reserve growth. Thirdly, if global economic risks switch from "inflation" to "stagnation", gold prices are expected to receive support. The soaring global energy prices can erode residents' actual consumption power on one hand, and may suppress demand and control inflation through forcing monetary policy tightening, which may ultimately lead to economic downturn or even recession. In the "stagnation" environment, the strategic value of gold will be further highlighted.