Gold investment continues to heat up
2024-08-15
Since the beginning of this year, global financial markets have been volatile, and the safe haven and value preservation function of gold has been given renewed attention, with gold prices hitting new highs repeatedly. Although high gold prices have deterred some consumer demand, the heat of investment demand has not diminished, and many institutional and individual investors have begun to increase their allocation of gold in their investment portfolios. In 2022, the World Gold Council first proposed "Gold+" in the Chinese market and gradually gained recognition. The "Gold+" investment category proposed by the World Gold Council refers to adding a certain proportion of gold to the performance benchmark of the investment portfolio, using gold as part of the long-term strategic asset allocation of the investment portfolio, to help investors better manage the risk and return of the investment portfolio. With the increasing recognition of gold by institutional investors and the growing demand from customers, more and more institutions are issuing "gold+" products. Industry insiders believe that the "Gold+" product has strategic and long-term implications for the allocation of gold, which helps enhance the risk resistance of investment portfolios, hedge against currency and bond volatility risks, and increase the long-term sources of returns for the portfolio. According to data released by the China Gold Association, in the first half of this year, the cumulative bilateral trading volume of all gold varieties on the Shanghai Gold Exchange was 29800 tons, a year-on-year increase of 39.77%, with a bilateral trading volume of 15.49 trillion yuan, a year-on-year increase of 68.48%. The cumulative bilateral trading volume of all gold varieties on the Shanghai Futures Exchange was 80100 tons, a year-on-year increase of 34.74%, with a bilateral trading volume of 35.67 trillion yuan, a year-on-year increase of 58.58%. Wang Lixin, CEO of the World Gold Council in China, stated that based on spot gold trading on the Shanghai Gold Exchange, supplemented by gold futures trading on the Shanghai Futures Exchange, and supported by commercial bank gold business, China has formed a sound, transparent, and fair gold market and trading mechanism. At the same time, boosted by the rise in gold prices, as a financial derivative product that tracks fluctuations in spot gold prices, gold ETFs (exchange traded open-end index funds) have also developed rapidly in recent years. In the first half of this year, the domestic gold ETF holdings rose to 92.44 tons, an increase of 30.97 tons from 61.47 tons at the end of 2023, with a growth rate of 50.38%, setting a historical high since the listing of domestic gold ETFs in July 2013. Wang Yanqing, Chief Researcher of Precious Metals at CITIC Securities Futures, believes that a gold ETF is an investment portfolio built on gold as the core underlying asset, and its net asset value performance is basically consistent with the trend of gold prices. Therefore, investors can obtain returns similar to investing in gold by investing in a gold ETF. Moreover, compared to physical gold, gold ETFs have the advantages of flexible trading, lower trading costs, and lower investment barriers, making it more convenient and efficient for investors to invest in gold ETFs. Wang Yanqing stated that in recent years, investment channels such as paper gold through banking channels and gold extension through the Shanghai Gold Exchange have been successively restricted. For ordinary investors, only two financial products directly linked to gold spot prices remain: gold futures and gold ETFs. Futures trading requires investors to have more trading skills, and the difficulty of getting started is slightly higher than that of gold ETFs. In this context, it is not surprising that gold ETFs are highly sought after. In addition, the issuance of gold containing products by institutional investors and the increase in gold allocation are also one of the reasons why the size of China's gold ETFs has reached a historic high. From the perspective of the future, the gold price may continue the bull market, mainly based on the following three reasons. Wang Yanqing said that firstly, the global economic recovery is slow, and Western countries are gradually withdrawing from the high interest rate environment. The scarcity of high-quality assets and the increase in market uncertainty factors will make gold assets more attractive; Secondly, as US inflation gradually declines and the Federal Reserve's interest rate cut cycle is about to begin, it will provide sustained support for gold; Thirdly, factors such as "de dollarization" and geopolitical risks will bring incremental demand for precious metals, and central banks around the world are continuously increasing their holdings of gold, providing a long-term upward driving force for gold prices. (New Society)
Edit：NingChangRun Responsible editor：LiaoXin
Source：Economic Daily
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