Abstract
Gold prices have continuously reached new highs, and the market mainly explains this from a grand narrative perspective, including tariff impacts leading to increased imports, de-globalization, declining dollar credit, and central bank gold purchases. This report attempts to quantify relevant data details to provide some insights into whether gold prices are peaking in the short term. In the short term, there are doubts about whether mainstream logic and trading conditions can continue to provide catalysts.
(1) Trump Impact: During Trump's previous term, from 2018 to 2019, there was also a decoupling of gold prices from real interest rates + an upward breakthrough of the gold price center. When the increase in gold prices, which could not be explained by real interest rates, reached around 8%, a short-term consolidation in gold prices may occur, with a rise of 7.5% from the beginning of the year to now.
(2) Dollar Credit/Fiscal Expansion: In previous reports, we constructed a revised &#34;Gold Standard Model&#34;: that is, the total market value of gold continues to be positively correlated with the total balance of U.S. debt. From the implied points of U.S. debt, the current gold price has exceeded 95% of the upper limit of the predicted range, placing it in an extreme historical condition.
(3) Central Bank Gold Purchases: The current round of central bank purchases is weaker compared to the previous three cycles, with monthly scales similar to the end of the 2023-2024 cycle, and further declines in purchasing strength cannot be ruled out. Moreover, the intensity of central bank purchases is not positively correlated with gold prices; on the contrary, referring to 2023-2024, the pace of central bank gold purchases is significantly negatively correlated with gold prices, meaning that after a substantial rise in gold prices, central banks may not chase high prices but are more likely to adjust against the trend. Therefore, the recent rapid rise in gold prices does not necessarily indicate a strengthening of the central bank's gold purchase logic.
(4) U.S. Import Surge and Short Squeeze: The signals from price differentials, positions, and inventory are not friendly. First, there are signs of convergence in the price difference between futures and spot; second, the import surge factor amplifies gold price volatility, requiring an extreme bullish market to cooperate, and the current net long position is already at a historical high, with a high positive correlation between net longs and gold price trends; third, after a significant accumulation of gold inventory, its coverage of longs has returned to above historical normal levels.
(5) Physical Substitute Demand: The correlation between Bitcoin and gold prices has significantly increased in recent years, and the price ratio between the two can indirectly reflect whether gold is over-adjusted in terms of pricing as a substitute for the dollar and other macro logic. Currently, the gold price relative to Bitcoin is at a historical low, and the repair process has begun since the beginning of this year. If there are concerns about short-term risks in gold, one can choose a &#34;long gold &amp; short Bitcoin&#34; combination for hedging.
Main Text
Gold prices have continuously reached new highs, and with real interest rates and the dollar index unable to provide strong support, the market still mainly explains this from a grand narrative perspective, including tariff impacts leading to increased imports, de-globalization, dollar credit, and central bank gold purchases. The general direction of these logics is undisputed, but there is difficulty in judging short-term points. We quantify relevant data details to provide some insights into whether gold prices are peaking in the short term. In the short term, there are doubts about whether mainstream logic and trading conditions can continue to provide catalysts.
<h2>(1) Trump Trade and Tariff Impact: Decoupling from Interest Rates and Upward Breakthrough in 2018-2019</h2>
Trump's trading has implications for inflation, benefiting gold. Additionally, tariffs act as a catalyst for geopolitical risks, increasing the value of gold allocation amid the trend of de-globalization. Throughout Trump's 2024 campaign, gold remains a strong asset.
A similar situation occurred during Trump's previous term, where gold prices exhibited two significant characteristics from 2017 to 2019, indicating substantial support from Trump and tariffs for gold prices:
First, gold prices decoupled from the traditionally explanatory variable of real U.S. Treasury yields, with a significant divergence beginning in 2017-2018.
Second, gold prices broke through a central resistance level in 2019, escaping the range-bound fluctuations since 2013, with a peak increase of 21% compared to the previous central level and a 13% increase compared to the upper limit of the range.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bbf47db1-eac6-430e-b31d-3ceb65b0fc00.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bbf47db1-eac6-430e-b31d-3ceb65b0fc00.png"/>
Specifically, regarding the several price impulses following tariff shocks: In 2018 and 2019, gold prices rose by 10% and 18%, respectively, with portions unexplained by real yields being 8.5% and 9.3% (which can be roughly understood as driven by Trump and tariffs); in the first wave of Trump's trading last year and the market at the beginning of this year, gold prices rose by 15.6% and 8.3%, with portions unexplained by real yields being 9.5% and 7.5%.
Conclusion: The current phase of rising gold prices is similar to that of 2018-2019, with increases of about 8% that cannot be explained by real yields, often leading to a consolidation phase for gold prices; if real yields do not significantly decline in the short term, gold prices may gradually approach a short-term peak; however, this does not indicate the end of the trend.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/191b7b17-113d-4c2b-954d-e80cc8cd9220.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/191b7b17-113d-4c2b-954d-e80cc8cd9220.png"/>
<h2>(2) U.S. Dollar Credit/Fiscal Expansion: Gold prices are already at the upper bound of the predicted central tendency at two standard deviations</h2>
Concerns about unsustainable U.S. fiscal policy, overextension of monetary credit, and the logic of physical gold replacing the dollar are widely accepted. In previous reports, we constructed a modified &#34;gold standard model&#34;: that is, the total market value of gold continues to be positively correlated with the total balance of U.S. Treasury debt.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e45ef260-ce49-4777-8762-c115db857adb.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e45ef260-ce49-4777-8762-c115db857adb.png"/>
Relevant calculations show that currently, gold prices have exceeded the upper bound of the 95% prediction interval for the implied central tendency of U.S. debt. Based on the Treasury's projected deficit scale for the next two years, predicting the overall debt scale, the implied gold price central tendency upper bound for 2026 will rise to $3060 per ounce. Historical patterns indicate that while deviations often occur, they are generally at extreme levels
Conclusion: If the above model and historical deviation patterns continue to hold, the short-term upward space for gold prices is limited.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c09a7250-c8ed-495a-a391-ec8fb76ee204.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c09a7250-c8ed-495a-a391-ec8fb76ee204.png"/>
<h2>(3) Central Bank Gold Purchases: Marginal Strength May Decline</h2>
The People's Bank of China resumed increasing its gold holdings in November last year. Based on historical data, we provide two observations:
First, the current round of central bank purchases is overall weaker compared to the previous three cycles. The current monthly scale is similar to that at the end of the 2023-2024 cycle, and the duration of the continuation still needs to be observed, with the possibility of further weakening not being ruled out.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/29a2ec58-fd99-4a04-8174-9981fefc6c23.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/29a2ec58-fd99-4a04-8174-9981fefc6c23.png"/>
Second, the intensity of central bank purchases is not positively correlated with gold prices. On the contrary, referring to the 2023-2024 round of purchasing cycle, the monthly purchase scale by the central bank shows a significant negative relationship with gold prices, meaning that after a substantial rise in gold prices, the central bank may not chase the highs but is more likely to adjust against the trend. Therefore, the recent rapid rise in gold prices does not necessarily indicate a strengthening of the central bank's gold purchasing logic.
Conclusion: The short-term surge in gold prices may not rely on increased central bank purchases.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/880c6963-defc-4c53-859e-469f284bd623.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/880c6963-defc-4c53-859e-469f284bd623.png"/>
<h2>(4) U.S. Import Rush and Bullish Short Squeeze: Price Differentials, Positions, and Inventories Indicate Doubts About Short-Term Momentum</h2>
Another mainstream narrative is that amidst unprecedented bullish sentiment, the risk of Trump imposing tariffs has prompted U.S. short investors to import large amounts of gold in advance to meet potential delivery demands. This brings two market catalysts:
First, the demand for physical gold increases, leading to higher gold borrowing costs, which further pushes up spot gold prices;
Second, the emergence of short squeeze behavior, where the exit of short positions exacerbates short-term fluctuations in gold prices.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d9c6961a-7dcf-4499-a16d-cf1ee33e1b5c.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d9c6961a-7dcf-4499-a16d-cf1ee33e1b5c.png"/>
Data reflects this logic to some extent:
(1) The gold inventory at the New York Stock Exchange has rapidly increased, with the last similar situation occurring after the pandemic in 2020, when global transportation disruptions led investors to accumulate inventory in advance;
(2) The price differential between New York gold futures and London spot gold prices has widened, a similar situation also occurred in 2020;
(3) Speculative long positions in gold remain at historical highs.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/81967fed-7969-4f31-a83b-b8471442edce.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/81967fed-7969-4f31-a83b-b8471442edce.png"/>
However, looking ahead, it is more inclined to believe that the driving factors for gold prices mentioned above are nearing their end:
(1) There are signs of convergence in the price difference between futures and spot;
(2) The factor of importing gold amplifies price fluctuations, requiring an extreme bullish market to support it, but currently, the net long position is already at a historical high. Historical experience shows that while the net long position may continue to remain high, it is difficult to stay at the top for long, and the short squeeze may be coming to an end;
(3) The net long position is highly positively correlated with gold price movements, and it is more likely to enter a consolidation phase in the short term;
(4) After a significant accumulation of gold inventory, its coverage for the bulls has returned to above the historical normal level, but there is still some distance from 2020.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/10714d28-c791-43a7-b6b4-b7a29290430f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/10714d28-c791-43a7-b6b4-b7a29290430f.png"/>
(5) Demand for physical asset alternatives: Gold still has room for recovery relative to Bitcoin
In addition to gold, Bitcoin is also one of the alternative assets to replace the US dollar, and it has garnered significant attention over the past two years. The correlation between the two was highly negative in the early stages, reflecting Bitcoin's risk asset attributes; however, in recent years, it has turned into a highly positive correlation, indicating a significant increase in Bitcoin's safe-haven attributes. Recently, Trump even claimed to consider increasing Bitcoin as part of reserve assets.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a6b09afa-66b4-49ae-977c-02df628c151d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a6b09afa-66b4-49ae-977c-02df628c151d.png"/>
Therefore, the relative price difference between the two can indirectly reflect whether gold is adequately priced in the macro logic of replacing the US dollar compared to Bitcoin. It can be seen that although gold prices have strengthened recently, Bitcoin's earlier rise was more pronounced. Currently, Bitcoin remains at a historical high relative to gold prices, and since the beginning of this year, it has started to decline significantly, indicating that gold still has room for recovery relative to Bitcoin.
Conclusion: From the logic of physical assets replacing the US dollar, there is still room for recovery in gold prices relative to Bitcoin. In the short term, amidst concerns about going long on gold, one can consider going long on gold &amp; short on Bitcoin.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2faa1c1f-c70e-4d27-90c8-39162c6fd18c.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2faa1c1f-c70e-4d27-90c8-39162c6fd18c.png"/>
Author of this article: Qian Wei S1440521110002, Source: CITIC Construction Investment Securities Research, Original Title: &#34;CITIC Construction Investment Qian Wei | Gold: Under the Grand Narrative, How to View the Short-term Rhythm&#34;
Risk Warning and Disclaimer
The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk

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CITIC Securities analysis believes that although gold prices continue to hit new highs, it is uncertain whether gold prices can continue to rise in the short term against the backdrop of grand narratives. The main factors include the decoupling of gold prices from real interest rates during the Trump era, the decline in U.S. dollar credit, weakened central bank gold purchases, and the U.S. rush for imports. The analysis points out that current gold prices are in an extreme historical situation, and the correlation with Bitcoin has increased, suggesting that investors consider a "long gold & short Bitcoin" strategy to hedge risks

- Gold prices have reached new highs, driven by factors such as tariff impacts, de-globalization, declining dollar credibility, and central bank purchases.  
- Short-term analysis suggests that while mainstream narratives support gold's rise, uncertainties remain regarding the sustainability of these trends, particularly in light of historical patterns and current market conditions.  
- The relationship between gold and Bitcoin indicates potential for gold's relative recovery, suggesting a strategy of going long on gold while shorting Bitcoin may be beneficial amid concerns over short-term risks.

CITIC Securities Co., Ltd.: Under the grand narrative, the continued rise of gold is in doubt