Recent international gold prices have experienced a rapid rebound, driven by a combination of overseas factors. The easing of geopolitical tensions between the US and Iran, along with the establishment of temporary shipping lanes in the Strait of Hormuz, has weakened oil prices and cooled inflation expectations. Additionally, the US June PCE data fell short of expectations, and July ADP employment growth was the lowest of the year. This has led markets to significantly lower expectations for Federal Reserve rate hikes, while joint US-Japan currency intervention has weakened the dollar, directly benefiting gold prices. Combined with the recovery of previously pessimistic expectations and continued inflows into overseas gold ETFs, these multiple forces have jointly pushed gold prices higher.
On the domestic supply side, domestic gold production fell by 14.62% year-on-year to 152.908 tons in the first half of the year, due to safety inspections and production halts. Total gold production, including imported raw materials, was 229.988 tons, down 9.01% year-on-year. However, overseas projects by large gold companies have continued to release capacity, with overseas mineral gold production reaching 48.098 tons, a 21.43% increase year-on-year, partially offsetting the supply contraction from domestic production cuts.
This current rally is only a stage-based rebound, and gold does not yet have a foundation for a sustained rally. The Federal Reserve's core policy of maintaining higher interest rates for longer has not fundamentally changed; the market has only delayed the timing of rate cuts, not fully priced in a rate-cutting cycle. Real yields on US Treasuries will remain range-bound at high levels, lacking a core long-term driver.
According to data from the China Gold Association, total national gold consumption in the first half of the year was 511.412 tons, a slight increase of 1.23% year-on-year. Within this, gold bar and coin consumption surged 28.42% to 339.336 tons, indicating strong investment demand. In contrast, gold jewelry consumption fell sharply by 33.88% to 132.133 tons, while industrial use of gold was 39.943 tons, a slight decline of 2.90% year-on-year. High gold prices have clearly suppressed rigid demand and industrial procurement.
In the first half of the year, gold trading volumes on the Shanghai Gold Exchange and Shanghai Futures Exchange decreased year-on-year, while turnover increased, showing a 'volume down, value up' trend. Domestic gold ETF holdings increased by 66.17% year-on-year in the first half of the year, with capital shifting more towards physical gold bars. Despite this, the long-term supporting logic remains intact, as China added 40.12 tons of gold to its reserves in the first half of the year, reaching 2,346.45 tons by the end of June, ranking fifth globally. The central bank has been increasing its gold reserves for 20 consecutive months, providing a long-term support level for gold prices.
There are two potential paths for future gold price trends. If Middle East geopolitical conflicts escalate again, oil prices rebound, pushing up inflation, or if Fed officials collectively release hawkish signals, leading to renewed expectations of rate hikes and a synchronized rise in the dollar and real yields, the current rebound will likely end quickly. Conversely, if geopolitical risks continue to ease, US core inflation declines steadily, and the Fed signals discussions on rate cuts, combined with continued central bank gold purchases and robust domestic demand for gold bars, gold prices could shift from a short-term rebound to a trend-based rally.
Investors can monitor three core signals to determine if gold is entering a medium-to-long-term uptrend: first, a downward trend in 10-year US Treasury real yields and the dollar index entering a medium-term depreciation channel; second, gold ETFs seeing net inflows for more than four consecutive weeks, reversing the significant decline in domestic ETF holdings seen in the first half of the year; and third, a sustained decline in US core inflation, with the Fed clearly signaling the start of a rate-cutting cycle. Short-term rebounds are driven by market expectations and sentiment, with high volatility and weak sustainability. Only when there is a clear turning point in fundamentals can gold embark on a long-term rally with a solid logic.
For different types of market participants, jewelry consumers with rigid demand should not participate in short-term gold price speculation. The sharp decline in jewelry sales in the first half of the year was due to high gold prices. It is advisable to purchase in batches during periods of price pullbacks, prioritizing brand workmanship fees and premiums, and avoiding chasing price increases. For medium-to-long-term asset allocators, options like gold ETFs and physical gold bars are suitable for periodic fixed investments or buying on dips. Gold allocation should not exceed 15% of total assets, with its core role being to hedge against inflation and smooth portfolio volatility, not for short-term arbitrage. The central bank's 20 consecutive months of gold purchases confirm gold's long-term value. For short-term traders, strict trading discipline is essential, setting a core stop-loss level at $4,000 per ounce and a first take-profit level at $4,400 per ounce. Daily risk control should include avoiding leverage, and positions should be reduced proactively before key macro data releases, such as US inflation and employment figures, to avoid short-term sharp volatility.
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