Gold prices have hit a new high in three months, approaching $4,700 and marching towards the $5,000 mark, and some investors who opened positions at high price levels still have floating losses of nearly $20,000.

On the 25th, spot gold once hit $4697.07 per ounce, the highest level since mid-May, approaching the $4700 threshold.

Wind data shows that since June 30, spot gold has started a strong rebound after bottoming out at $3942.43 per ounce. The price movement has accelerated upward in August, with a cumulative increase of about 15% so far this month.

Spot gold price movement Screenshot from Wind

Domestic gold prices in China are rising simultaneously. On the 25th, the Au99.99 of Shanghai Gold Exchange opened at 1004 yuan per gram, and the highest price touched 1012.6 yuan per gram as of press time. Why has the gold price embarked on a rising trend?

Weakening US dollar serves as the catalyst

Multiple logics are intertwined behind this rapid rise in gold prices. Li Gang, Research Director of China Forex Investment Research Institute, said in an interview with China News Network that the weakening US dollar is the direct catalyst for the breakthrough of gold prices. The US Treasury has increased the repurchase of long-term US Treasuries, triggering market concerns about intervention in the US Treasury market, liquidity environment and the real value of the US dollar. The decline of the US dollar reduces the gold purchase cost for non-dollar investors.

Li Gang pointed out that the deeper logic lies in the market beginning to price in the US fiscal credit risk. The positioning of gold has also changed. It is no longer limited to the traditional safe-haven asset, and has gradually become a tool to hedge against US dollar credit and sovereign debt risks. At the same time, the demand for gold allocation has picked up. In July, the global physical gold ETF recorded a net inflow of about 3 billion US dollars, with positions increased by about 23 tons. Coupled with the continuous gold purchase by central banks of various countries, it provides long-term support for gold prices.

Deng Zhijian, senior investment strategist of DBS Bank (China), told China News Network that the joint intervention of the United States and Japan in the yen exchange rate made the market see that the retreat of yen-related arbitrage transactions will impact the US stock and bond markets.

Deng Zhijian pointed out that the US Treasury's operation of "issuing short-term bonds and repurchasing long-term bonds" also confirms that the demand for medium and long-term US Treasuries is weak. Affected by slowing inflation and weakening employment, under multiple risks such as the declining probability of the Federal Reserve raising interest rates and the falling of the US dollar index, increasing gold holdings has become a choice for investors to hedge risks.

This round of gold price rise has also sparked discussions among investors, many of whom have posted the profit and loss of their positions on social platforms.

"I check the market every day and have been looking forward to this rebound, and now my account is finally about to return to cost." "I'm very tangled now, whether to continue holding and bet on the price hitting 5000, or to take profits when it's appropriate." "Although the market is hot this round, I dare not add positions easily anymore"...

Ms. Yan, an investor in Beijing, told China News Network that up to now, she holds a total of 170 grams of gold investment products with an average position price of about 1113.29 yuan per gram. Calculated based on the investment gold price of about 1000 yuan per gram on the 25th, she still has a floating loss of about 19,000 yuan.

"The gold price has finally risen, which is worthy of my persistence. I hope the gold price will continue to rise so that I can get back my cost as soon as possible." Ms. Yan said that she is bullish on gold in the long term and will hold it for a long time.

May challenge the $5000 level

For the subsequent trend of gold price, Li Gang is relatively optimistic, and he believes that it may not be difficult for the gold price to rise to $5000 in the short and medium term.

"Calculated based on the current range of $4680 to $4700, there is still 6% to 7% upside space for the $5000 level. If the US dollar remains weak, the long-term US interest rate is suppressed by fiscal policies, and the global central banks and ETF funds continue to flow in, after the gold price breaks through $4700, it is practically possible to challenge $5000, and $5000 is not the end of the market trend." Li Gang said.

Li Gang also reminded the key observation nodes: after the gold price effectively stands at $4700, $5000 will gradually become the "market trading target". At the same time, we should also be alert to the low-probability risk. If the US Treasury intervenes in the bond market to drive the US dollar stronger and the US real interest rate rises significantly, the gold price may have a technical correction.

Deng Zhijian pointed out that in the medium and long term, the growth trend of global central bank gold purchases and investment-side gold demand is relatively certain. Combined with short-term factors such as US debt concerns and Japan's interest rate hike, gold price has sufficient upward momentum in the short term. From a technical perspective, $4670 and $4850 per ounce are two key resistance levels.

Deng Zhijian mentioned that the profit margin of chasing the rise at the current entry point is limited, and leveraging will amplify investment risks. Investors with higher risk tolerance can pay attention to gold mining stocks. Even if the gold price pulls back, it is still at a high level compared with the same period last year. With the dual rise of gold demand and price, the returns of gold mining stocks are expected to further improve; conservative investors can allocate physical gold and gold ETFs that track gold prices.

The views in this article are for reference only and do not constitute investment advice. Investment is risky, so be cautious when entering the market.

This article is from the WeChat Official Account "China News Network" (ID: jwview), written by Li Ziman, and published by 36Kr with authorization.