Precious metals have pulled back sharply from highs. Analysts: Still optimistic about gold in the long term

In the past two trading days, the prices of precious metal futures in both internal and external markets have made a sharp correction. As of Tuesday's close, the prices of the main domestic gold and silver (27.29, -0.07, -0.25%) futures contracts fell by 3.54% and 4.78% respectively.

Zhan Dapeng, director of nonferrous metals research at Everbright Futures, believes that the escalation of the conflict between Iran and Israel once pushed up the price of gold (2335.92, -6.18, -0.26%) and strengthened the safe-haven property of gold. However, when the geopolitical conflict shows signs of easing, gold will also It fell in response.

Ye Qianning, precious metal researcher at GF Futures, said that the U.S. economy has remained strong recently. The latest economic Beige Book shows that since late February, overall economic activity has expanded slightly and inflation has been overall moderate. Judging from the statements of Federal Reserve officials, they are not satisfied with the progress of the fall in inflation, and even warned of raising interest rates again, sending a hawkish signal. In addition, the overall correction in commodity trends further expanded the decline of gold and silver.

"The main factor that currently dominates the price trend of precious metals is market sentiment." Hongye Futures nonferrous metals researcher Zhang Tianao analyzed that recent U.S. inflation data have been resilient, and the market's expectations for the Federal Reserve to cut interest rates continue to be postponed. Against this background, precious metals still gain experienced a substantial increase. He believes that the main logic behind this round of surge in precious metals is the market’s increasing concerns about the U.S. dollar credit system. U.S. government debt continues to expand and is now close to 1.3 times annual GDP. The market’s first choice for value preservation outside the U.S. dollar credit system is gold. In addition, central banks of various countries have also continued to purchase gold in the past two years. In terms of silver, the relatively good development of the photovoltaic industry has promoted the demand for silver, and the overall supply and demand pattern has remained in short supply. Under the resonance of macroeconomics and fundamentals, silver has also achieved large gains.

Zhan Dapeng believes that the current logic of gold trading is mainly concentrated in three aspects: first, the Federal Reserve’s continued tightening monetary policy will undergo a major change this year, that is, the start of an interest rate cut cycle; second, geopolitical factors, whether it is the continuation of the Russia-Ukraine conflict , or the geopolitical conflict between Palestine and Israel, the safe-haven attribute of gold comes into play again; third, the central bank's continuous gold purchases have enhanced investors' confidence in holding gold.

Ye Qianning said that from the perspective of supply and demand, gold is generally in a state of investment demand driving price increases, and the marginal pull brought by physical investment demand from India and China will bring long-term benefits.

Analysts: Still bullish on gold in the long term

Looking forward to the market outlook, Ye Qianning believes that in the medium to long term, as the U.S. dollar’s ​​currency credit is damaged and the influence of fundamental factors weakens, the monetary attributes of precious metals will be strengthened, driving the rise of gold. Follow-up attention will be paid to the development of geopolitical conflicts in the Middle East and other places, and seize the opportunity of bargain hunting. .

Zhan Dapeng believes that the rapid rise in gold prices has begun to overdraw expectations of interest rate cuts by the Federal Reserve and geopolitical conflicts. Mid-term adjustments are inevitable, but the long-term bullish trend remains unchanged. Judging from CFTC gold positions, the total positions continue to rise, but the net long positions of institutions have not kept up with the pace. This also shows that the gold price has entered a "fish tail" market at the current position. As the May Day holiday approaches, in the face of a complex external environment, the volatility of the gold market may increase again. It is recommended to reduce positions before the holiday.

Zhang Tianao believes that during the May Day holiday, the Federal Reserve will hold an interest rate meeting. The market judges that there is a high probability that the interest rate will not be cut at this meeting. The latest interest rate cut has been postponed to September. Against this background, precious metals will adjust or continue in the short term. Regarding future precious metal prices, the general background of the Federal Reserve's interest rate cuts has not changed. At the same time, the continuous emergence of geopolitical and risk events during the year can have a positive impact on the precious metal sector. In the medium and long term, precious metals still have allocation value. The current market volatility is relatively violent. It is recommended that investors control risks and not blindly chase the rise and fall. At the same time, they can use a variety of financial derivatives to seek more stable returns.

UBS believes that any price correction is an opportunity for investors to increase their holdings of gold, and the persistence of geopolitical risks may provide support for the gold market in the long term. A healthy pullback in gold prices suggests the market is able to form a base of support at higher levels, which should help bolster investor confidence in gold's long-term bull market.

Senior gold analyst Mark Mead Baillie said that gold is very overbought in the short term, but remains severely undervalued in the long term.