Three Key Factors Driving Gold Prices Up

On July 17, international gold prices once again reached record highs. As of 5:00 PM Beijing time, spot gold (London Gold) surged to an all-time high of $2,482.14 per ounce, while COMEX gold futures prices touched $2,487.4 per ounce.

Analysts attribute this surge in gold prices to a strong expectation of the Federal Reserve lowering interest rates, increased risk aversion, and ongoing gold purchases by central banks worldwide. These factors are seen as the key "catalysts" driving the recent spike in gold prices, with predictions indicating further potential for price increases in the future.

Gold Prices Soar to Historical Highs

Since the end of June, international gold prices have been on a rapid ascent. After breaking through the previous peak of $2,450.07 per ounce on May 20, gold prices have continued to set new records. Data from Tonghuashun shows that as of 5:00 PM Beijing time on July 17, spot gold (London Gold) reached an intraday high of $2,482.14 per ounce.

The futures market mirrored this trend. On July 17, COMEX gold futures prices hit an intraday high of $2,487.4 per ounce, marking a cumulative increase of over 7% since June 27. In the domestic market, the main contract of Shanghai Gold Futures saw a daily increase of over 2%, hitting a high of 585.84 yuan per gram, with a cumulative gain of over 6% since June 28.

The A-share market also saw impressive performances from gold stocks. By the close of trading on the 17th, stocks such as Lazhentongling and *ST Zhongrun hit their upper limits, while Yimin Group, Shenzhen Zhonghua A, Cuihua Jewelry, Yuyuan Co., Laofengxiang, and Mingpai Jewelry all showed significant gains.

Thanks to the substantial rise in gold prices, many A-share related companies have reported significant performance improvements in the first half of the year. Li Chao, an analyst at Guojin Securities, noted that this year, the cost increase for gold companies has been minimal, and with the low probability of a deep price correction, there is a foundation for stock price recovery.

Three Key Factors Driving Gold Prices Up

What are the main drivers behind this round of gold price surges?

Strengthening Expectations of Federal Reserve Rate Cuts: Zhang Chen, a precious metals analyst at Yide Futures, stated that the continuous rise in gold prices since July has been primarily supported by the marginal strengthening of rate cut expectations. Core economic data, such as inflation and employment, which the Federal Reserve closely monitors, have simultaneously fallen beyond expectations, providing policy grounds for rate cuts.

Ongoing Gold Purchases by Global Central Banks: Liu Guangyuan, a precious metals analyst at Huatai Futures, pointed out that the continuous purchase of gold by global central banks has been a significant factor. This behavior not only pushes up gold prices but also, since this gold is converted into foreign exchange reserves and temporarily withdrawn from circulation, provides strong support for gold prices. Even at high prices, the risk of significant adjustments remains relatively low.

Rising Risk Aversion Due to Global Economic Uncertainty: Increased global economic uncertainties have led to a rise in risk aversion, further supporting the surge in gold prices.

Potential for Further Gold Price Increases

Looking ahead, can the bullish trend in gold continue?

Xia Yingying, director of nonferrous metals at Nanhua Futures, believes that risk aversion demand will continue to support gold prices periodically. However, investment asset allocation demand will need to be anchored to the marginal changes in the Federal Reserve's monetary policy. With the expectation that the Federal Reserve will start a rate cut cycle in the second half of the year, gold prices are expected to fluctuate initially and then rise.

Additionally, the stance of global central banks on gold purchases remains a key focus for investors. The World Gold Council's 2024 annual global central bank gold reserve survey report indicates that nearly 30% of central banks plan to increase their gold reserves in the coming year. A recent research report by Citibank predicted that central bank gold purchases could support gold prices reaching new highs again in 2025.