Huatai Securities: Short-term geopolitical changes have not disrupted the medium- to long-term fundamental logic of gold.

ME News message, April 11 (UTC+8). A research report from Huatai Securities points out that since March, geopolitical tensions have disrupted global risk appetite, but gold has not shown the expected safe-haven performance; instead, it has risen and fallen in line with risk assets. Since the outbreak of the US-Iran conflict involving Israel in March, the maximum drawdown at one point exceeded 17%, before rebounding after signs of easing in the situation. The institution believes that the reasons for this round of gold adjustment include crowded positioning earlier on, liquidity shocks, some central banks selling gold, and capital being diverted from energy commodities. Looking ahead, in the short term, the Middle East geopolitical situation has eased somewhat, and gold rising alongside risk assets reflects that monetary policy factors outweigh safe-haven attributes. In the medium to long term, short-term changes in the geopolitical landscape have not undermined gold’s underlying logic, including the reshaping of the geopolitical order, the risk of US debt getting out of control, central bank gold purchases, Federal Reserve rate cuts, and the scarcity of safe-haven assets. The pricing framework based on real interest rates plus central bank gold purchases still has some explanatory power. Of course, if the Federal Reserve enters an active rate-hike cycle, it may also trigger a sharp adjustment in gold. Overall, gold faces multiple factors in the short term; tail risks are reduced, but volatility remains high amid overlapping influences. In such a context, it may be an appropriate response to add positions during pullbacks or to wait until volatility converges before acting (buying) on the opportunity. (Source: Jin10)