Gold prices have staged a rebound.
On November 5, international gold prices extended the previous day's gains. As of press time, London spot gold stood at $4,123.74 per ounce, surging 1.5% intraday and touching a high of $4,146.99 per ounce, reclaiming the $4,100 per ounce round-number threshold.
Futures markets strengthened in tandem. As of press time, COMEX gold futures rose 1.47% intraday to $4,132.8 per ounce, also climbing back above $4,100 per ounce, with an intraday peak of $4,155.8 per ounce.
Gold prices have quickly warmed up following a deep correction. A review of market action shows that on October 30, London spot gold briefly sank to $3,869.96 per ounce, a maximum pullback of roughly $1,700 per ounce from this year's high of $5,598.75 per ounce. Over the past two trading sessions, gold prices have seen a clear rebound, kicking off a rapid repair rally.
"The sharp short-term rebound in gold prices was directly driven by a repair in market liquidity," Zhu Shanying, chief macro researcher at CITIC Futures Research Institute, told reporters. In late October, global risk appetite weakened in sync, equity markets at home and abroad corrected collectively, and precious metals came under liquidity pressure, with the drag from falling U.S. stocks particularly pronounced. This week, the uncertainty over the U.S. midterm elections was resolved, and a recovery in market risk appetite drove equities higher, bringing capital flows back into gold.
From a fundamental perspective, Zhu Shanying further explained that the Democrats winning both chambers is more favorable for gold. On one hand, the market expects this configuration to help constrain U.S.-Iran geopolitical conflicts, reducing the tail risk of short-term escalation, raising long-term expectations for de-escalation, and thereby lowering forward inflation and Federal Reserve rate hike expectations. On the other hand, some states may impose stricter regulation on data center construction, somewhat weakening expectations for strong economic growth.
Zhang Zihai, director of the Huaxin Futures Research Institute, likewise noted that after the Democrats retook both chambers, the market has strong expectations for a easing of Middle East tensions, and oil prices have retreated from highs. Falling oil prices weaken upside inflation risks, cooling December Fed rate hike pricing, while the dollar index weakened in tandem, opening up room for gold prices to repair. In addition, technical repair combined with continued central bank gold purchases provided bottom support, jointly underpinning the recovery in gold prices.
Looking ahead, Zhu Shanying judged that after the oversold repair, gold prices are expected to shift into a ranging pattern in the short term, with the market waiting for new upward drivers. The impact of the Democrats controlling both chambers is expected to gradually emerge after early next year, short-term geopolitical conflicts may still see reversals, and tail risks have not been fully eliminated, so gold is expected to overall maintain a ranging repair pace.
Over a longer horizon, Zhu Shanying is bullish on gold prices in the medium to long term, with follow-up focus on two main threads: interest rates and credit. On the rates side, the key focus is confirmation of the end of Fed rate hikes, which may require confirmation of an end to geopolitical conflicts or sustained evidence of economic slowdown; on the credit side, the key focus is the next one to two quarters, when the U.S. debt scale approaches its ceiling and the two parties engage in bargaining, and potential government shutdown risks may also become a driver for higher gold prices.
On investment strategy, Zhu Shanying believes that gold's allocation value has already emerged. From historical experience, liquidity shocks often bring good buying points, and the gold market has recently undergone a stress test from a liquidity shock; after the midterm election results are settled, the bottom range for gold prices has become clearer, and allocation-type demand can gradually enter. However, in the short term, attention is still needed on possible geopolitical tail risks, and position control is recommended, with trading-type demand advised to wait for right-side opportunities after upward drivers emerge.
Zhang Zihai's view is relatively cautious. In his view, the investment question for gold is not "whether it is worth allocating," but "at what pace to allocate." The current move is a repair rally brought by easing suppression factors, with a bullish bias but not suitable for chasing highs. True directional confirmation still requires the December policy meeting outcome to land.
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