Amid escalating concerns over global uncertainty, gold stocks in Hong Kong experienced a collective surge on Wednesday. At the time of publication, Lingbao Gold (03330.HK) and China Gold International (02099.HK) both saw gains of over 5%, leading the rally in gold stocks.
In the U.S. stock market overnight, regional banks and oil stocks experienced the sharpest declines. Investors' concerns over the banking crisis, unease about the U.S. debt ceiling, and uncertainty surrounding the Federal Reserve's future interest rate policy weighed on market risk appetite.
The takeover of First Republic Bank did not alleviate market concerns but instead exacerbated them, with U.S. regional bank stocks facing another round of sell-offs. Meanwhile, the Fed's interest rate decision tonight is prompting investors to seek safety.
In recent days, international gold prices have continued to rise, with COMEX gold futures in New York once again breaking the $2,000/ounce threshold.
In an interview with the Economic Daily, Su Wenjie, fund manager of Jia Shi Resource Selection, said the most critical factor influencing gold prices at present is the change in U.S. monetary policy. With the U.S. CPI growth rate in December last year falling below market expectations, inflation levels began to decline after the Fed's aggressive rate hikes curbed demand. As expectations for a weakening U.S. economy gradually strengthen and the inversion of U.S. long and short bond yields intensifies, the timing of a shift in Fed monetary policy is approaching, and gold prices are expected to continue rising.
"Additionally, geopolitical conflicts and increased central bank gold purchases will continue to support gold prices. Gold, as the only investment with both precious metal and currency characteristics, still holds a vital strategic position in asset allocation and will continue to play a role in hedging against currency depreciation. Investing in gold has long-term value," said Su Wenjie.
An official from the China Gold Association also believes that in the first quarter of 2023, as the pandemic's impact on the global economy gradually fades and geopolitical instability persists, the world's economic growth slows, and inflation expectations remain, gold prices are pushed to historic highs.
Gold Gains Favor Among Central Banks and Institutions
During periods of global instability, gold often becomes more attractive, resulting in skyrocketing demand over the past year.
Data from the World Gold Council reveals that the amount of gold purchased by central banks in 2022 increased by 152% year-on-year, reaching 1,136 tons, a new high since 1967.
Famous investor and Bridgewater Associates founder Ray Dalio stated on a program on April 26, "I prefer gold."
"I don't understand why people lean more towards Bitcoin rather than gold. If you look globally, for central banks, gold is the third-largest reserve asset, after the dollar and the euro. Central banks are snapping up gold, not bonds, because it's eternal and universal," Dalio said.
