International Gold Rises First; U.S. Bond Fluctuations Push Up Long-term Gold Price Center

　　Securities Times reporter Sun Xiangfeng

　　Recently, gold prices have started to rise, accelerating since mid-August, with the spot price of London gold climbing back above $4,600.

　　Affected by factors such as the U.S. 30-year Treasury yield hitting a new high since 2007 and the U.S. Treasury intervening in the bond market, market concerns over the credibility of the U.S. dollar continue to escalate. Gold, as a credit hedging tool, is attracting capital, and its monetary attributes are being reassessed for value.

　　According to institutional analysis, core mid- to long-term logic supporting gold prices include concerns over U.S. fiscal conditions and global central banks' gold buying demand. A global credit restructure may lift gold’s price center.

　　US Treasury volatility boosts gold prices

　　Since August, gold prices have accelerated upward. As of August 25, the spot price of London gold had broken through $4,600/ounce, approaching the $4,700 mark. At the same time, the world’s largest gold ETF, SPDR Gold Trust, saw its latest holdings rise to 1,048.348 tons, an increase of more than 41 tons since early August.

　　Institutional sources indicate that volatility in the US Treasury market is a key driver for this round of gold price increases. On August 18, the yield of the 30-year US Treasury touched 5.335% intraday, a new high since June 2007. Subsequently, the US Treasury announced it would at least double the scale of liquidity support repurchase operations for long-term nominal coupon bonds (10-30 years).

　　After the news was released, the 30-year US Treasury yield quickly fell about 9 basis points from its high, the US dollar index dropped 0.86%, and gold directly benefited from the simultaneous weakening of nominal yields and the USD, breaking through the $4,500/ounce mark.

　　“Although this repurchase is a liquidity support operation by the US Treasury rather than Fed quantitative easing and is relatively limited in scale, the upward movement of long-term yields triggered policy attention, easing concerns over disorderly dumping of long-term bonds, which restored risk appetite and boosted gold investment demand,” said Qv Rui, Senior Deputy Director at Oriental Jincheng’s Research and Development Department, in an interview with Securities Times.

　　Zhou Puhan, Chief Strategist at Huafu Securities, stated to Securities Times that with the 30-year US Treasury yield hitting its highest since 2007, US debt breaking through $40 trillion, and the Treasury intervening in the market, multiple factors have heightened worries over the USD’s credit. Gold, as a credit hedge, has garnered attention from the market, with its monetary nature prompting a value re-rating.

　　Fed rate hike expectations cool

　　Looking at gold price trends this year, Fed rate hike expectations have always been the “Sword of Damocles” hanging above gold prices. However, with US inflation data persistently below expectations, room for further rate hikes by the Fed is narrowing.

　　Qv Rui believes that the broad weakness in US July CPI (Consumer Price Index), PPI (Producer Price Index), and retail sales data has significantly reduced the necessity for a September rate hike. The market has shifted its pricing from “Will there be another hike this year?” to “How long will high rates be maintained?” The peak in rate hike expectations is likely past.

　　A related official at Guolian Minsheng Research Institute told Securities Times that the key factor for whether the Fed hikes rates is economic data. The US is currently in a downward phase of the debt cycle, with all industries except AI under pressure. AI has little impact on inflation and employment data, so the basis for rate hikes is not solid.

　　“This year’s rate hike expectations were largely driven by long-term inflation worries from the US-Iran conflict. For now, there’s still some uncertainty, but relief is likely,” said the official.

　　However, Qv Rui admitted that expectations for Fed rate cuts have not yet been established, and “higher for longer” remains the main policy tone. Since taking office, Fed chair Waller’s stance on inflation has been “hawkish;” in the July FOMC statement, he emphasized, “will not hesitate to act when necessary and appropriate.” As such, rate hike expectations have not “reversed,” but have “converged while rate cut expectations have not started.”

　　Institutions: Gold prices have long-term support

　　US Treasury credit volatility, converging rate hike expectations, and other factors consistently support gold price expectations. Zhou Puhan noted that with US employment and inflation data falling back, previous tightening expectations have been adjusted, enhancing gold’s appeal. He said to watch for US July PCE (Personal Consumption Expenditure) Price Index data and the Jackson Hole Central Bank Symposium for potential expectation changes. Concerns over US fiscal conditions and central bank gold buying demand are mid- to long-term core logic behind gold prices; credit restructuring will raise the gold price center.

　　From a medium- to long-term perspective, the odds seem higher for gold prices to rise. A Guolian Minsheng Research Institute official told Securities Times that the biggest support for the gold bull market since 2022 has been concerns about USD credit, and there is no sign of this issue being solved in the long run. As suppressive factors earlier in the year ease, the baseline situation is for the USD to return to a downward cycle. He expects the USD’s downward trend to likely last into next year.

　　Qv Rui also analyzed that the marginal impact of US monetary policy on gold in the second half of the year is “easier to rise than fall”—the impact of stronger-than-expected tightening is less than in the first half, while the elasticity of stronger-than-expected easing is greater.

　　Qv Rui further believes that the strategic allocation value of gold remains prominent and its upward logic is sustainable. Long-term structural factors such as high US fiscal deficits, US debt exceeding $40 trillion, weakening USD credit, and the accelerated process of global de-dollarization will continue to strengthen the value of gold as a sovereign credit hedge, an inflation hedge, and a core asset for diversified global reserves.

　　As gold prices rise, investment opportunities in gold mining stocks are also drawing attention. Zhou Puhan noted that gold stocks began to rebound in July, ahead of gold prices, and as gold continues to rise, earnings for gold stocks may receive a boost. Several gold companies have already released strong interim results.

　　Zhou Puhan believes the rolling P/E ratio of the gold sector is at a historical low, providing a relatively safe valuation margin, and with rising gold prices, performance and valuation may resonate.

　　The aforementioned Guolian Minsheng Research Institute official said that gold mining stocks are among the most highly correlated commodities with spot gold prices. Thus, rising gold prices is the main fundamental improvement for gold mining stocks. However, analysis should be done on a case-by-case basis, as differences in mineral quality and production pace among companies will lead to corresponding performance differences.

Editor: Guo Jian