CITIC Securities: The probability of $4,000 is that the bottom area of this round is expected to return to the upward channel during the year

The Zhitong Finance App learned that CITIC Securities released a research report saying that since this year, the price of gold has fallen rapidly after rising, but gold is still in a big bull market. The reasons are that the US fiscal deficit is expanding rapidly, the geographical rift is difficult to bridge under anti-globalization, and the continued support of global central bank purchases. Therefore, the current fall in gold prices is only a temporary adjustment in the bull market. The current retracement is close to the historical extreme, and the area around $4,000 per ounce is likely to be at the bottom of this round. Looking ahead to the market, it is expected that the impact of the situation in the Strait of Hormuz on gold prices will shift from suppression to boost. The Federal Reserve's monetary policy may be more optimistic than market expectations. Combined with the sharp rise in US military spending, the deficit is expected to return to an upward channel within the year.

CITIC Securities's main views are as follows:

Gold is still in the midst of a big bull market that began in 2015, and the three long-term reasons have not changed.

1. The US federal deficit is expected to rise year by year. It is expected that due to the continuous increase in military spending, interest expenses, etc., the increase in US federal government spending and deficit is almost irreversible. 2. Geographical conflicts are difficult to resolve. Anti-globalization and the intensification of geopolitical conflicts remain the cornerstone of gold pricing. 3. The central bank continues to buy funds. According to data from the World Gold Council, the central bank has continued to buy large sums of money in recent years, and the importance attached to gold has increased year by year.

This round of retracement is close to the historical extreme value, and the bottom characteristics are obvious.

Currently, gold is still in the third round of the big bull market since 1968. The biggest pullback in the three rounds of the big bull market is narrowing round by round. The shift of global central banks to net buyers is probably the core reason. Excluding the special retracement situation in the first round, the maximum retracement in the first two rounds was close to -29%. When applied directly, the bottom of the international gold price was $3840/oz, which is already close to the lowest price in this round; in addition, the six-factor gold price model measures the bottom of the gold price of about $3970/oz under pessimistic assumptions. The conclusion from both perspectives is consistent: the current gold price is close to the bottom of this round of adjustments.

Since the beginning of the trading year, the price of gold has gone through four stages. The core is the clearance of speculative capital.

In the first phase (January-February), the geopolitical conflict was expected to increase the price of gold sharply; in the second phase (March-April), the evolution of the conflict between the US and Iran triggered a panic outflow of speculative capital, and the price of gold fell; in the third phase (April to mid-June), the market was desensitized to geography, speculative capital was reconcentrated in the AI sector, and the price of gold continued to decline; in the fourth phase (end of June to July), speculative funds were basically cleared, and the price of gold bottomed out.

In the future, the impact of the US-Iran conflict on gold is expected to reverse from suppression to boost.

Since July, the negative correlation between oil prices and gold prices has gradually been decoupled, and the relationship between changes in the situation in the Strait of Hormuz and gold price trends is being reversed. Gold's asset style is shifting from a risky asset to a safe-haven asset. It is still judged that the US-Iran-Israel conflict will be difficult to resolve in a short period of time. It is expected that after the speculative funds are fully cleared, pessimism about the geographical situation is expected to be transformed back into support for the price of gold.

The acceleration of US fiscal expansion this year will provide stronger support for the price of gold.

According to the 2027 US presidential budget, the US fiscal deficit may expand at an accelerated pace this year and next, driven by a sharp expansion in military spending. This is expected to provide stronger support for the price of gold.

Walsh faces multiple pressures, but the Federal Reserve's policy may still be looser than market expectations.

It is still judged that Walsh's historical statements have fluctuated, and his network of relationships with Trump points to a loose monetary policy trend. However, in July, three FOMC voting committees voted against interest rate hikes, and the “family civil war” reflects complex internal conflicts. Therefore, Walsh hopes to bypass the Federal Reserve establishment through a working group, but this also means a complicated reform process. The Federal Reserve is more likely to stand still before the November US midterm elections due to entanglement from many parties. Expectations for interest rate hikes at current prices in the market may be pessimistic.

Combining the above factors, the outlook for the gold market in the second half of the year is still optimistic, and we can pay more attention to the Fed's trends.

The US Federal Reserve's interest rate meeting and Jackson Hole annual meeting before the November midterm elections are all very noteworthy, and may be a sign of the beginning of a gold bull market. The updated six-factor model for gold prices shows that under a neutral assumption, the price of gold is expected to break through the highest point in history early next year.

Risk factors:

The Federal Reserve's monetary policy falls short of expectations, the risk of the intensification of the US-Israel war, other geopolitical risks, US economic growth exceeding expectations, and the risk of large fluctuations in the overall financial market.