Precious metals rise, how to allocate in the medium and long term

　　On January 3, the precious metals sector opened higher. As of the close, the industry index rose by 2.86%. The precious metals sector has been rising for two consecutive trading days. Yesterday, the industry index rose by 2.25%.

　　The three major indexes turned red after falling. The Nancai Financial Terminal showed that as of press time, the Shanghai Composite Index rose by 0.10%, the Shenzhen Component Index rose by 0.42%, and the ChiNext Index rose by 0.17%.

　　From the perspective of Shenwan's first-level industries, the non-ferrous metals industry led the gains, among which the precious metals sector rose by 3.5%. The gold ETF (518880), which tracks the domestic spot price of gold, fluctuated and rose today, with an increase of 0.69% as of press time.

　　Image source: Pexels

　　Why is the price of gold rising？How will it perform in the medium and long term？

　　On the news front, the international gold price continued to rise at the beginning of 2025. On January 2, the international gold price rose, with COMEX gold futures rising 1.18% overnight to $2,672 per ounce; London spot gold rose 1.26%. The trend of gold in 2025 is positive but more moderate, and it may remain in a range of fluctuations.

　　The World Gold Council recently released the “Gold Outlook 2025” report, pointing out that as of November 2024, the price of gold has risen by more than 28%.

　　Highest monthly purchase record in 2024 Central banks reported 60 tons of net gold purchases, with the Reserve Bank of India in the lead, adding 27 tons of gold reserves, followed by Turkey and Poland, which increased their holdings by 17 tons and 8 tons respectively. My country's central bank also increased its gold reserves again, and as of the end of November 2024, the gold reserves were 72.96 million ounces. Total gold demand exceeded $100 billion for the first time in the third quarter.

　　According to the research report of GF Securities, according to the CME Federal Reserve Watch data on December 28, the probability of the Federal Reserve maintaining the federal funds rate unchanged in January and March 2025 is 89.3% and 51.8% respectively. Combined with the current market speculation on US inflation in 2025, gold prices are mainly expected to fluctuate in the short term.

　　CITIC Securities pointed out that the global market's enthusiasm for gold investment may continue, and geopolitical conflicts in the Middle East, Russia, and Ukraine in 2025 will affect the upward trend of gold prices. In the medium term, cryptocurrencies and gold do not yet constitute a competitive relationship in risk-averse configuration. According to model predictions, under the neutral assumption, the COMEX gold futures price can reach more than $3,100 per ounce in mid-2025.

　　Funeng Futures believes the current gold pricing is gradually shifting from the traditional real interest rate framework to the US dollar credit framework. However, the strong US dollar has suppressed the gold price, as Trump's official inauguration approaches and overseas macro uncertainties increase, the market's risk aversion sentiment has heated up, which has supported the gold price.

　　The uncertainty of Trump's proposal to stop the war after taking office, his tough foreign policy, and his policy combination will lead to a substantial increase in fiscal deficits and thus weaken the credit of the US dollar. In terms of operational suggestions, the medium- and long-term gold is still mainly long.