Gold pricing eventually returns to its underlying nature
Gold is a physical currency asset with zero credit risk, while credit currencies primarily carry two risks: one stems from central bank monetary policies leading to inflation risk, and the other comes from political risk, leading to the risk of delisting.
As a result, gold primarily possesses two main attributes: hedging against inflation and serving as a safe-haven asset.
1. Gold's attribute of hedging against inflation is mainly based on its zero credit risk characteristic.
2. Gold's safe-haven attribute, to some extent, is a derivative expression of its inflation-hedging attribute.
Real interest rates can capture the logic of gold prices, but there are three additional points to consider when using the real interest rate framework to analyze gold trends:
1. Real interest rates are a proxy indicator of gold prices, rather than being strictly linearly correlated.
2. The essence of the real interest rate framework lies in gold being an alternative to the credit of the US dollar, with underlying variables being US monetary policies and economic fundamentals.
3. Avoiding a misconception about gold's "inflation-hedging" nature: In addition to the current inflation level, inflation expectations are equally important.
The current opportunity window for gold allocation is likely to be earlier than in previous cycles, and gold's excess returns will gradually become evident as the inflection point of Fed rate cuts approaches.
1. The US economy will eventually head towards a hard landing, breaking the stickiness of core inflation, and inflation data will sharply decline.
2. According to the theory of equilibrium interest rates, the Fed needs to rapidly lower policy rates below equilibrium rates, which may lead to a non-linear rate-cutting pace, driving real interest rates down rapidly."
As a result, gold primarily possesses two main attributes: hedging against inflation and serving as a safe-haven asset.
1. Gold's attribute of hedging against inflation is mainly based on its zero credit risk characteristic.
2. Gold's safe-haven attribute, to some extent, is a derivative expression of its inflation-hedging attribute.
Real interest rates can capture the logic of gold prices, but there are three additional points to consider when using the real interest rate framework to analyze gold trends:
1. Real interest rates are a proxy indicator of gold prices, rather than being strictly linearly correlated.
2. The essence of the real interest rate framework lies in gold being an alternative to the credit of the US dollar, with underlying variables being US monetary policies and economic fundamentals.
3. Avoiding a misconception about gold's "inflation-hedging" nature: In addition to the current inflation level, inflation expectations are equally important.
The current opportunity window for gold allocation is likely to be earlier than in previous cycles, and gold's excess returns will gradually become evident as the inflection point of Fed rate cuts approaches.
1. The US economy will eventually head towards a hard landing, breaking the stickiness of core inflation, and inflation data will sharply decline.
2. According to the theory of equilibrium interest rates, the Fed needs to rapidly lower policy rates below equilibrium rates, which may lead to a non-linear rate-cutting pace, driving real interest rates down rapidly."