The gold market is experiencing a resurgence after a brief period of adjustment, igniting significant interest within the precious metals sectorIn recent months, various industry-focused funds have reported impressive returns, demonstrating the allure that gold holds for investors in today's volatile economic landscape.
Analysts attribute the structural drivers of rising gold prices primarily to central bank demand, while factors related to economic cycles stem from potential interest rate cuts by the U.SFederal ReserveAs experts look to the future, there is a growing consensus that the price of gold in London could surpass the $3,000 per ounce mark by the end of next year, signifying a bullish market outlook.
As of November 21st, 6:23 PM Beijing time, London gold has registered four consecutive days of gainsFollowing a notable six-day decline between November 8 and November 15, the market’s fluctuations in gold prices have become particularly relevant given the uncertainties surrounding global economic conditions and rising inflation pressuresSuch dynamics naturally attract the attention of investors carefully monitoring market trends.
Goldman Sachs recently highlighted that the recent price correction offers an opportune moment for buyingThey maintain their target price for gold at $3,000 per ounce by the end of 2025, buoyed by ongoing central bank purchases and anticipated rate cuts by the FedThe differentiation between structural and cyclical drivers of demand has become increasingly evident, with the central banks' strategies forming the core of sustained demand, while external risks such as rising interest rates and a strengthening U.S. dollar could pose potential threats to this trend.
On October 31, gold prices hit a historic peak of $2,789.92 per ounce, which translates to approximately 639.56 RMB per gramOn the same day, the domestic gold variant AU9999 reached a record high of 655 RMB per gram, underscoring the volatility present in the market, even as it closed with a lengthy upper shadow, signifying profit-taking by traders.
Comparing the peak price on October 31 to the closing price on November 14, one analyst revealed that the AU9999 demonstrated price fluctuations exceeding 60 RMB per gram across 11 trading days
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This volatility indicates a shift in gold's price-performance ratio, with some industry experts suggesting that the value proposition of gold has shifted in recent times.
Mark Wei, Managing Director of Mingze Investment, attributes the recent upward trajectory in gold prices to the escalation of geopolitical conflicts, which has reignited previously cooled risks associated with global politicsCoupled with a slowdown in the U.S. dollar index's rise, these factors have played a crucial role in pushing gold prices higher after previous dropsThe preceding declines in gold were influenced by profit-taking from risk-averse capital and strengthening dollar sentiments.
Looking forward, Wei believes that gold prices are likely to experience fluctuations amid diverging market opinions in the near termHowever, in the mid to long term, he anticipates that as geopolitical tensions persist and global economic uncertainties remain, alongside the Fed's monetary policy stance, gold will continue to exhibit an upward trendHe suggests that any short-term price corrections could also represent strategic entry points for long-term investors.
In the eyes of Liao Chen, a fund manager at Ming Shi Partners, a review of recent gold price trends reveals that, beyond traditional influencing factors like real interest rates and the dollar, the central banks of various nations have played a pivotal role in the current gold price rallyTheir decisions to stockpile gold stem from severe geopolitical situations and apprehensions about the ballooning U.S. fiscal deficit, which raises concerns about the dollar’s credibility.
Liao predicts these two pivotal factors are unlikely to see a reversal anytime soonHence, he expects central banks and institutional investors will continue their gold accumulation strategiesNotably, these entities appear relatively insensitive to short-term price fluctuations, thus maintaining a steady investment approachTherefore, from a medium-term perspective, Liao anticipates gold prices will remain on an upward trajectory
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While immediate market volatility might occur, he recognizes gold’s enduring investment value as a viable asset in a diversified portfolio.
The performance of gold has had a ripple effect throughout the financial markets, causing precious metals-focused funds to thrive this yearWith gold prices climbing, numerous funds that heavily feature gold have witnessed substantial gainsOver 50 precious metals-themed funds, not accounting for A and C share distinctions, have posted a cumulative rise of over 15% since the beginning of the yearLeading the charge is the Xibei Lide Strategy Preferred A fund, boasting an impressive increase exceeding 50% and standing out among its peers.
According to data from Wind, as of November 20th, 53 precious metals funds have recorded rises of more than 15% this yearNotable performers include Xibei Lide Strategy Preferred A and C, Dongfang Cycle Preferred A, Huaxia Zhongzheng Shanghai-Shenzhen-Hong Kong Gold Industry Stock ETF, among others, each exceeding 25% growth.
Specifically, the Xibei Lide Strategy Preferred fund consistently allocated significant portions to gold stocks in the first three quarters, although the proportion diminished somewhat in the third quarter compared to the first twoAdditionally, Dongfang Cycle Preferred A has made it repeatedly into the market’s top performance rankings due to its extensive investments in gold equities.
Industry experts have expressed optimism about the long-term outlook for gold stocks benefiting from higher gold pricesAs balance sheets recover, profit realization should become smootherWith the bullish trend in gold remaining intact, gold stocks represent a compelling value proposition even after recent market correctionsBy 2025, a target price of $3,000 per ounce has become widely accepted within market circles, indicating that the gold bull market is far from over.
Wang Huachun, a fund manager at Guorong Fund's equity investment department, suggests that in terms of asset allocation, investments typically fall into two categories: income-generating assets and non-income assets
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