The shattered dream of the Federal Reserve cutting interest rates still cannot stop the crazy price of gold. No, today they hit another record high.

On Friday, spot gold continued to rise, reaching a record high of 2,390 US dollars/ounce; COMEX gold reached the 2,400 US dollar mark, reaching a maximum of 2412.8 US dollars/ounce.

Following the take-off of gold prices, gold concept stocks in the domestic market are also breaking ground.

Today, the Hong Kong stock Lingbao Gold surged more than 8%, the Zhaojin Mining Industry rose more than 7%, and China Gold International rose more than 5%; A-shares directly set off a wave of gains and stops, and Mancaron, Guanfu shares, Baomo shares, Baoding Technology, and Zhongrun Resources all went up and down.

Since the beginning of February this year, the gold concept has been booming with the price of gold, and the cumulative increase has now exceeded 46%.

In response, Tianfeng Securities believes that gold stands at the starting point of a medium- to long-term bull market, and the elasticity of gold stocks is about 2.23 times that of the price of gold.

Key Drivers

Previously, the market's expectation that the Fed would cut interest rates during the year was the main driving force for gold.

However, now, even though the March CPI shatters expectations of the US interest rate cut in June, the price of gold is still “soaring through the sky” trend, and the bulls don't seem to have been affected by the onslaught of the US dollar. This is very puzzling.

Right now, the market is weighing the timing for the Federal Reserve to cut interest rates.

Judging from recent influencing factors, the PPI data released by the US yesterday rose 0.2% month-on-month, compared to the previous forecast of 0.3%. Weaker-than-expected data has slightly boosted hopes that the US will cut interest rates this year.

According to the CME Federal Reserve's observation tool, traders expect the probability of interest rate cuts to rise slightly to 23.8% in June. Previously, after the CPI data was released, it had dropped to 17%. The probability of interest rate cuts in September is 44.7%.

David Meger, director of metals trading at High Ridge Futures, said that the producer price index (PPI) data is a bit colder than expected, so there is still hope that interest rates may be cut before the end of the year, so gold prices have risen.

On the other hand, ongoing geopolitical concerns have also increased the light on the price of gold.

Recently, after the Iranian embassy was attacked by air, Iran has vowed to retaliate, and the risk of the escalation of the situation in the Middle East continues to affect the market.

The US recently predicted that Iran would launch a large-scale missile and drone attack on Israel.

On April 11, local time, Iran said that if the UN Security Council condemns Israel's attacks and brings the perpetrators to justice, then there may be no need for Iran to punish the Israeli regime.

Iran now not only wants to counter Israel's “bombing house” shame, but also wants to prevent the conflict from escalating.

Ali Vaez of the International Crisis Group believes that the current situation Iran is facing is “finding ways to retaliate so that it can preserve its face and not lose its sanity.”

Furthermore, the purchase of gold by central banks around the world also boosted the flow of safe-haven funds, thereby benefiting the price of gold.

From a global perspective, as of the end of March 2024, the top ten countries with gold reserves were: the United States, Germany, Italy, France, Russia, China, Switzerland, Japan, India, and the Netherlands. The total gold reserves were 24260.63 tons, up 15.58 tons from February, and increased for 17 consecutive months.

Among them, the Central Bank of China continued to “buy buy” in March, buying gold for the 17th month in a row, and its gold reserves reached 72.74 million ounces.

Essentially speaking, the surge in demand for gold by central banks is actually a sign of weakening dependence on the dollar. In other words, the dollar is becoming less and less attractive.

“An unbridled wild horse”

Looking at gold like a “wild horse out of control,” the market was dumbfounded.

The logic behind the strengthening of gold in the past is applied to the current crazy price of gold, and it doesn't seem very applicable. Because, even if the US dollar rises, it will be difficult to stop the take-off of gold prices, regardless of whether you cut interest rates or not.

Now, all the big players on Wall Street are holding high the bullish flag of gold.

The CIO of UBS said that despite the strength of the US dollar and the reduction in market expectations for interest rate cuts from the Federal Reserve, strong demand from global central banks and Asian investors still boosted the price of gold over the past few weeks, and even outperformed the global stock market and bond market.

The agency is also optimistic about the long-term trend of gold prices and raised the gold price forecast for the end of this year to 2,250 US dollars/ounce from the previous price of 2,250 US dollars/ounce.

However, it also reminded the market, “In the short term, if US economic data triggers market expectations that the Federal Reserve will delay interest rate cuts, there may be a risk of a pullback in gold prices.”

Bank of America commodity strategist Michael Widmer predicts that by 2025, the price of gold will jump to $3,000 per ounce.

This is mainly due to strong demand from central banks and the expectation that investors will return to the gold market once the Federal Reserve starts cutting interest rates.

“If the Federal Reserve finally starts cutting interest rates, investors should return to the market. We previously proposed that if the Fed cuts interest rates in the first quarter, the price of gold is expected to reach 2,400 US dollars/ounce. We have now raised this expectation, and the price of gold is expected to rise to 3,000 US dollars/ounce by 2025.”

Faced with the insane amount of gold, some people in the market also warned that high inflation would make a comeback.

Wall Street mogul Peter Schiff (Peter Schiff) pointed out that high inflation will make a comeback, and it will be necessary for the Federal Reserve to raise interest rates drastically.

“When will Wall Street finally wake up? It not only notes that the price of gold has reached a record high, but it also warns that high inflation will make a comeback and that a sharp increase in interest rates is necessary.”

Ed Yardeni, a long-time Wall Street bully and president of investment consulting firm Yardeni Research, believes this rise will continue, especially if inflation makes a comeback. He expects that by the end of next year, the price of gold may rise to a high of 3,500 US dollars.

UBS also pointed out that since real interest rates are still high and the recession seems far away, it is still too early to announce the end of the rise in gold prices.

A breakout in gold prices can be viewed as an ominous sign, and it's not hard to imagine that geopolitical risks might follow.

As far as the market is concerned, the current prices of many things seem to be misestimated, such as extremely low credit spreads, high stock valuations, and moderate volatility. It can be said that the gold market has already sent warning signals.