Gold price analysis framework: gold has commodity attribute, financial attribute and monetary attribute, and has anti inflation function and risk aversion function. Since the collapse of the Bretton Woods system, the price of gold is no longer directly linked to the US dollar. Unlike bulk commodity prices, it is mainly affected by supply and demand. In addition to commodity attributes, its trend is also affected by monetary policy, inflation level, hedging demand and other factors. Starting from the financial attribute of gold, its pricing logic can be simplified and understood as the relative operation rhythm change of nominal interest rate and inflation. Real interest rate = nominal interest rate – inflation expectation. From the historical data, the gold price usually shows a negative correlation with the US dollar real interest rate.
The inflationary pressure continued and the value of gold allocation was highlighted: in the first quarter, the change of the situation in Russia and Ukraine led the trend of gold price. It can be seen that under the demand for hedging, the gold price rose with the US dollar index. In April, the US CPI fell back to 8.3%, but it is still at an all-time high. Under the influence of high commodity prices, rising rents, wage price spiral and other factors, it is difficult to alleviate the pressure of high inflation. In response to inflation, the Federal Reserve tightened monetary policy, but at the interest rate meeting in May, the Federal Reserve announced a 50 basis point increase in interest rates and will begin to shrink the table passively in June, which is not more hawkish than market expectations. Historically, gold prices have fluctuated during the interest rate hike period, and the differences between inflation and economic growth have resulted in different results. At present, the concern of the Fed about the tightening of the price of gold and the formation of high inflation support. However, on the other hand, the Fed’s expectation of raising interest rates, plus tips, turned positive for the first time since March 2020, and the US dollar strengthened, which suppressed the gold price in the short term. Based on various factors, we believe that at the moment of market transaction stagflation risk, the demand for asset allocation has increased, and the winning rate of bullish gold is relatively high.
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Risk tip: US economic growth exceeded expectations; US monetary policy tightened more than expected; The US dollar index rose higher than expected; Risk of changes in market environment.
