According to the commodity market analysis system of the business community, the spot market price of gold will be 446.45 yuan/g on April 27, 2023, up 0.48% daily and 1.60% higher than that at the beginning of the month (April 1).

 

According to the commodity market analysis system of the business community, the average price of silver in the market will be 5602.33 yuan/kg on April 27, 2023, up 5.70% from the beginning of the month (April 1), and 4.81% from the early average price of 5345 yuan/kg in the spot market at the beginning of the year (January 1).

 

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Summary of Price Trends of Precious Metals and Crude Oil

 

In the early stage, the correlation between precious metals and crude oil trends is strong. After the second half of 2022, precious metal prices have bottomed out and stabilized, and the magnitude of macro factors affecting them has begun to show differentiation.

 

Comparison of precious metal gold and silver price trends in the past year

 

In 2022, the rise and fall trends of precious metal gold and silver have converged, but the decline in silver was deeper from April to August, and the recent recovery has been more significant. In December, silver continued its strong trend last month, and gold began to consolidate at high levels. In 2023, precious metal gold and silver have consolidated at high levels, with a slight decline in February. Since March, precious metal prices have started to rise.

 

Policy logic

 

The expectation of the Federal Reserve raising interest rates by 25BP in May is strong, but there are expectations of a slowdown in subsequent monetary policy tightening; Overall, the short-term interest rate hike cycle is still ongoing, and the upward space for precious metals has always been constrained before the expected rate hike is falsified.

 

Fundamental logic

 

1. Domestic consumption of precious metals has improved

 

According to the latest statistics from the China Gold Association, the national gold consumption in the first quarter of 2023 was 291.58 tons, an increase of 12.03% compared to the same period in 2022.

 

Among them: 189.61 tons of gold jewelry, a year-on-year increase of 12.29%; 83.87 tons of gold bars and coins, a year-on-year increase of 20.47%; Industrial and other gold consumption reached 18.10 tons, a year-on-year decrease of 16.90%.

 

2. Strong demand for central bank purchases

 

The global central bank’s gold purchase volume reached a record high of 1136 tons in 2022, and this trend is still continuing in 2023. Among them, the Singapore Monetary Authority purchased 51.8 tons of gold in the first two months of this year; The People’s Bank of China has increased its holdings of gold for five consecutive months, and in the first quarter of 2023, global central banks maintained net purchases of gold. The People’s Bank of China increased its holdings of gold for five consecutive months from November 2022 to March 2023, with a total increase of 57.85 tons in the first quarter. By the end of March, China’s gold reserve had reached 2068.38 tons.

 

3. Year-on-year growth in domestic supply

 

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In the first quarter of 2023, the domestic raw material gold production was 84.972 tons, an increase of 1.571 tons compared to the same period in 2022, a year-on-year increase of 1.88%. Among them, 66.506 tons of gold from gold minerals and 18.466 tons of non ferrous byproducts were produced. Among them, large gold enterprises (groups) produce 32.717 tons of mineral gold in their mines, accounting for 49.19% of the national total. Overseas mines such as Zijin Mining, Shandong Gold, and Chifeng Gold achieved a mineral gold output of 14.395 tons, a year-on-year increase of 29.17%.

 

In addition, in the first quarter of 2023, the production of imported raw materials was 29.901 tons, a year-on-year increase of 24.41%. If this part of the imported raw material production was added, a total of 114.873 tons of gold were produced nationwide, a year-on-year increase of 6.92%.

 

Increased probability of high consolidation of precious metals

 

At present, the price of precious metals has approached a new high in nearly a decade. In the early stage, we expected that under the high inflation and high interest rate hikes, the pace of overseas economic recession may lead to relatively full risk aversion, which has been basically reflected in the price. Some central banks around the world increased their holdings of gold reserve, which also formed some support for gold prices.

 

However, China’s economic data for the first quarter grew by 4.5%, which partially alleviated concerns of a global economic recession. Coupled with the expected increase in interest rates by the Federal Reserve in May, it has to some extent suppressed the prices of non yielding precious metals.

 

It is expected that the high volatility and consolidation of precious metals will be the main trend in the short term, with a bullish outlook in the medium to long term.

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