After several months of adjustment, gold has regained the attention of global investors. International gold prices have risen by 10% since the end of June, with a particularly sharp rally in August, recording the largest weekly gain of the year. Prices have broken through key levels of $4,200 and $4,300 per ounce, briefly reaching $4,400. Meanwhile, copper futures have also hit record highs.
Fund managers generally believe that multiple driving factors have combined to fuel the current gold rally. The core logic for a long-term bull market remains solid, but short-term uncertainties persist. The current phase is better defined as a secondary repair period following a high-level rebalancing.
Multiple Driving Factors Converge
Wang Lele from the Gold ETF of Fullgoal Fund noted that earlier this year, international gold prices rose rapidly before experiencing a significant pullback. The recent rebound was driven by the clearing of earlier positions, a marginal easing of rate hike expectations, and continued central bank gold purchases. The direct starting point was the clearance of accumulated leveraged positions, which showed signs of being replenished in early August. As selling pressure was released, the marginal selling pressure gradually weakened, making gold prices less sensitive to new negative news and allowing small positive factors to trigger a faster recovery.
Yang Kaining from the Gold ETF of China Southern Asset Management pointed to two main reasons for the rebound. First, expectations of a Federal Reserve tightening cooled after the July non-farm payrolls data showed a decline, limiting the Fed's ability to maintain high interest rates. Second, central banks continued to buy gold, with the People's Bank of China increasing its holdings by about 20 tonnes in July, marking 21 consecutive months of purchases.
Ai Xiaojun from the Gold ETF of Guotai Asset Management highlighted that the main catalyst was a shift in expectations for US monetary policy. The unexpected negative growth in July non-farm payrolls significantly reduced the probability of a September rate hike by the Fed. This put pressure on the US dollar and caused US Treasury yields to fall from their highs, providing a strong boost to gold prices.
Chen Ziyang from Great Wall Resource Select Fund cited the "surprise" US employment data as the most direct catalyst. The cooling of Federal Reserve rate hike expectations drove gold prices higher. Additionally, signs of easing tensions in the Middle East helped alleviate energy inflation concerns, opening up room for valuation recovery in gold.
Tang Chen from Noah Global Gold Fund described the rally as a resonance of three driving forces. First, central bank gold purchases established a solid base, with global net purchases surging 62% year-on-year in the second quarter. Second, ETF and private capital flows followed, with global gold ETFs reversing a previous outflow trend to achieve net inflows of about $30 billion in July. Third, speculative positions amplified the rally's slope, as high-net-worth families and investors increased their risk-off allocations.
Liang Pusen from the Gold ETF of First Seafront Fund noted that multiple constraints that had been suppressing gold prices showed marginal improvement from the end of June. The weakening of ADP and non-farm payroll data, along with significant downward revisions to historical data, led to a rapid cooling of market expectations for Fed rate hikes, easing the upward pressure on real interest rates and laying a macroeconomic foundation for gold's recovery. The reversal of capital outflows provided a significant push, while central bank purchases continued to offer bottom-line support.
Potential to Resume Medium-to-Long-Term Uptrend, But Short-Term Uncertainties Remain
Yang Kaining believes that gold has the conditions to resume its uptrend, but the short term is more likely to be a trend repair rather than a one-sided rally. A weaker US dollar, cooling rate hike expectations, and increased central bank purchases are all favorable for gold. If US employment continues to slow and inflation does not rebound excessively, the rally could persist.
Wang Lele expects gold prices to maintain a relatively strong overall pattern, but more likely as a high-level consolidation after a price increase, rather than immediately entering a new linear upward trend. The current core contradiction is not that gold lacks long-term logic, but that long-term logic coexists with relatively high short-term opportunity costs. This suggests that gold price movements may shift from trend-driven to event-driven and range-bound fluctuations.
Chen Ziyang sees signs of a cooling US economy, increasing the probability of gold stabilizing. However, further upward movement will require observation of subsequent US economic data.
Tang Chen believes that, after this adjustment, international gold prices have the potential to resume their medium-to-long-term uptrend, but profit-taking pressure after the sharp short-term rally cannot be ignored. Additionally, inflation data remains high, and market concerns about rate hikes have not fully dissipated, requiring continued verification through subsequent data.
Liang Pusen outlines the medium-to-long-term logic for a gold recovery, including the clearing of accumulated profit-taking positions, full release of momentum selling pressure, and a weakening of the capital-absorption effect from AI investments. From a medium-to-long-term perspective, amid global geopolitical and order restructuring, gold's role as a traditional safe-haven asset with no credit risk will continue to be valued. However, significant volatility will accompany the upward process, and the transition from a rebound to a reversal requires sustained verification by macroeconomic data and capital flows.
Core Logic of a 'Long-Term Bull' Remains Solid; Current Phase May Be a Secondary Recovery
Ai Xiaojun suggests that after a six-month adjustment, the bottom of gold prices may have been found, and the current phase is a test of upward momentum. If gold can successfully hold above $4,365, the future price center could move up to the $4,365-$4,800 range. The core logic of a long-term bull market for gold remains solid, supported by the continued pressure on the dollar credit system amid global monetary over-issuance and fiscal deficit monetization, as well as the ongoing trend of "de-dollarization" globally.
Wang Lele identifies three structural drivers for gold's medium-to-long-term value. First, the strengthening of monetary and reserve attributes, with central bank purchases remaining a key structural factor. Second, the global trend of reserve diversification and sovereign credit constraints enhance gold's strategic value. Third, in a high-volatility environment, gold's portfolio hedging value increases. Overall, the medium-to-long-term allocation logic for gold remains, but return distribution may shift from one-sided appreciation to reallocation within a range.
Liang Pusen highlights that the US's massive balance sheet, combined with market doubts about the Fed's independence, continues to undermine global confidence in dollar assets, driving the global reserve asset rebalancing process. Central bank gold purchases form a core medium-to-long-term support for gold prices. Currently, gold prices are in a recovery phase after a deep adjustment, and the long-term structural logic has not been disrupted. However, after a rapid short-term rebound, some trading long positions have accumulated, and the market is not showing a one-sided linear upward trend, but rather a volatile upward trend.
Yang Kaining believes that gold's core allocation value has not changed in the medium to long term, as it has low correlation with traditional risk assets and provides portfolio diversification value during periods of fiscal expansion, geopolitical risk, and currency credit uncertainty. The current phase is better defined as a secondary repair period after a high-level rebalancing, making it more suitable for strategic holding and phased allocation.
Chen Ziyang argues that the US debt problem lacks an effective solution, and dollar credit remains a core concern for the market. Against this backdrop, gold, as a hedging asset against dollar credit, has long-term allocation value. Central bank purchases also provide solid structural support, placing gold in a favorable allocation range from a long-term perspective.
Tang Chen notes that the core narrative of central bank gold purchases has not changed in the medium to long term, providing continuous upward support for gold prices. In a downward cycle for high-volatility assets, gold's value as a low-volatility asset will become more prominent. However, the marginal variables affecting gold prices have shifted from central bank purchases and consumer demand to trading factors, such as the sustainability of ETF net inflows, which will require several months of verification. The nearly certain rate hike in Japan may cause short-term disruptions, and the Fed's policy path still needs more economic data for confirmation. In the short term, gold prices are likely to maintain a narrow range-bound consolidation pattern.
Foundation for Gold to Reach New Heights is Solid, but Potential Risks Exist
Chen Ziyang objectively points out that the current rally can only be defined as a rebound. Potential risks include the possibility of a significant recovery in oil prices, which could drive imported inflation, forcing the Fed to maintain high interest rates or even restart rate hikes, thereby suppressing gold's upward potential.
Liang Pusen notes that structural factors like central bank purchases and global debt and monetary system restructuring provide a solid foundation for gold to hit new highs. However, the journey will not be smooth. Potential risks include: first, if AI technology leads to unexpected productivity gains, it could change the pricing logic of global inflation and growth, diverting gold allocation funds; second, if the new Fed chair can rebuild market trust in Fed policy, the valuation of gold as a hard currency on the other side of the "de-dollarization" narrative could be suppressed; third, stronger-than-expected employment and inflation data could rekindle rate hike expectations, suppressing gold prices from the real interest rate perspective.
Yang Kaining argues that central bank purchases, reserve diversification, and the repricing of Fed independence and policy certainty are not entirely dependent on short-term rate cut trades, providing a more solid support for gold. Recent joint intervention by the US and Japan in the yen and discussions on the Fed's FIMA facility reflect market concerns about exchange rate and US Treasury system stability. Risks mainly come from a rebound in US inflation, a rise in real interest rates and the dollar, and the strengthening of the dollar cycle through AI investment and technology trade.
Ai Xiaojun warns that in the short term, gold may still be affected by economic data, geopolitical disturbances, and market risk appetite, leading to volatility. Global liquidity shocks, passive selling of gold, and a slowdown in central bank purchases could also disrupt market trends. Investors need to continuously track macro policy expectations and capital flow changes, and rationally view gold price fluctuations.
Tang Chen believes the foundation for gold to reach new heights is relatively solid. Central bank purchases provide the most solid bottom-line support, while the shift in global gold ETF flows from net outflows to net inflows offers marginal incremental support. Risks include a slowdown in central bank purchases, which could shake the fundamental logic of gold's long-term pricing. Additionally, if US inflation data unexpectedly rebounds, leading to a re-convergence of rate cut expectations, or a significant rise in US Treasury real interest rates, it could weaken the momentum for ETF and private capital inflows, potentially reducing the marginal driving force for gold's upward movement.
Wang Lele notes that the price area after the previous decline has strong support, driven by three types of demand: continued central bank purchases, buying by long-term and physical market participants during price declines, and short-covering and re-entry of trend-following capital.
Silver, Copper, and Aluminum Are Also Worth Watching
Tang Chen recommends watching silver, copper, and aluminum. Silver benefits from dual industrial and financial drivers, with strong demand from new energy, AI data centers, and the photovoltaic industry, combined with supply constraints and low inventory, offering potential for higher elasticity than gold. Copper benefits from tight supply and strong demand from AI computing infrastructure and new energy, strengthening its "computing metal" attribute. Aluminum is supported by domestic capacity constraints and overseas supply disruptions, maintaining a tight supply-demand balance.
Wang Lele is also relatively bullish on copper. Compared to gold, copper is more of a growth asset, driven by supply constraints and growing demand from power grids, new energy, and AI data centers. However, copper prices have already priced in some of the optimistic outlook, so attention should be paid to the pace of demand realization and supply changes.
Yang Kaining suggests actively watching copper and other metals with low supply elasticity. In the short term, copper prices are supported by a rebound in Chinese refined copper imports, falling inventories, and tight spot supply. In the medium to long term, AI data centers, grid upgrades, and electrification are structurally increasing copper demand, while mine supply is relatively limited. Silver can be considered within the precious metals space, as it usually shows higher elasticity during upward phases but also experiences greater volatility than gold.
Ai Xiaojun highlights copper and aluminum. Copper's pricing logic has shifted from traditional cycles to growth driven by AI and new energy electrical infrastructure. Aluminum benefits from extreme supply-demand resilience, with domestic capacity ceilings and overseas geopolitical disruptions pushing global aluminum inventories to near 20-year lows.
Chen Ziyang suggests that copper and some small metals may offer good investment value. Copper's core logic lies in a tight supply-demand balance, with limited new mine supply and steady demand from traditional sectors, while AI data centers provide a significant new demand driver. Small metals like tungsten, tin, and tantalum, which are highly correlated with the AI industry chain, have limited supply elasticity and clear AI-driven demand, but their overall market capacity is small, leading to greater price volatility.
AI Wave Extends Resource Investment Logic to Key Materials
Wang Lele notes that AI is extending the investment logic of resources from traditional cyclical demand to key material supply. Copper is a higher-conviction bulk material for AI data centers, with high copper consumption per MW. Indium, gallium, and germanium are important materials for high-speed optical modules and high-frequency semiconductors. Rare earths are often overlooked but are critical for motors and functional materials in AI hardware, including MLCCs, cooling pumps, fan motors, and HDD components.
Yang Kaining believes that sub-sectors with relatively high domestic substitution rates are more noteworthy, as they can better capture procurement demand from wafer fabs during the capacity expansion phase. Key sub-sectors include electronic special gases, CMP polishing materials, and wet electronic chemicals.
Chen Ziyang points out that AI-related material investment opportunities are not limited to non-ferrous metals, but also include PCB materials, electronic component materials, semiconductor materials, and some small non-ferrous metals.
Tang Chen identifies copper as a core material for computing connectivity, used in AI server power distribution and high-speed cables. Tin is used in advanced packaging and solder for AI servers, with demand 3-8 times that of traditional equipment. Tantalum is used in tantalum capacitors for computing equipment, with NVIDIA GB200 servers requiring 3,000-5,000 units per unit, a hundredfold increase over traditional servers. Indium is a key material for high-speed optical module substrates. Aluminum is widely used in server heat sinks, and materials like tungsten and gallium, subject to export controls, also benefit.
Comments