Multiple factors drive the rebound in gold prices

Recently, international gold prices have experienced a rapid rebound. On April 7th, COMEX gold prices rose by 1.04%, and on April 8th, they surged over 4% intraday, breaking through the $4,800 per ounce level; domestic Shanghai gold futures main contracts also climbed simultaneously, reaching a high of 1,070 yuan per gram during the session, a significant rebound from the March lows.

In response, industry insiders believe that the recent trend in gold prices is neither simply a short-term risk aversion sentiment being fully realized nor a complete reversal of the gold price trend. Essentially, it is a recovery phase after gold was passively sold off due to sharp oil price fluctuations triggered by geopolitical conflicts and market liquidity tightening, leading to an oversold condition. Meanwhile, the potential resumption of navigation through the Strait of Hormuz and a plunge in international oil prices have alleviated previous expectations of rate cuts, prompting the market to reprice “rate cut expectations warming.”

Qu Rui, Senior Vice President of Research and Development at Orient Securities, stated that recently, liquidity pressure easing and the warming of rate cut expectations have jointly driven up gold prices. However, it is important to note that although negotiations have signaled easing, core disagreements between the US and Iran have not been truly resolved, and geopolitical uncertainties still exist. Coupled with ongoing central bank gold purchases worldwide, the persistent pressure on US finances and debt, and the gradual approach of future monetary easing cycles, the core logic of overall upward movement in gold has not been broken.

Looking long-term, Qu Rui pointed out that gold prices are mainly driven by three factors: first, the potential long-term escalation of Middle Eastern conflicts, which could increase war expenditures and heighten concerns about US fiscal sustainability, damaging US dollar credit and benefiting gold; second, the market has begun pricing in sustained high oil prices in the future, which could pose downside risks to the US economy. If economic and employment data weaken, and the Federal Reserve implements rate cuts, gold prices will rise; third, tariffs and military threats will remain primary means for the Trump administration to compete for external interests and overseas resources, leading to ongoing adjustments, differentiation, and restructuring of the global political and economic order, with significant uncertainties remaining. Central banks around the world will continue to buy gold for strategic reasons.

According to New Century Futures’ research perspective, the development of Middle Eastern tensions and the Federal Reserve’s monetary policy are the core recent drivers affecting precious metals. On one hand, rising oil prices increase inflation expectations, and the convergence of rate cut expectations exerts pressure on precious metals through the real interest rate logic, which is a short-term influence on precious metal prices. On the other hand, short-term escalation of tensions may cause liquidity shocks, putting pressure on gold prices, but geopolitical risks and recession fears also trigger safe-haven capital inflows into gold. Therefore, the three major factors—hedging, inflation, and interest rates—affect gold price fluctuations, with the dominant market drivers varying over different periods.

Further, New Century Futures pointed out that currently, the scenario of ongoing negotiations combined with the Strait of Hormuz under Iranian control is the baseline for Middle Eastern developments. Under this scenario, the market may continue to trade on the possibility of conflict escalation, with gold’s safe-haven attributes prevailing. As the conflict prolongs, concerns about stagflation increase, making gold, as an anti-stagflation asset, more sought after. However, expectations of Federal Reserve rate hikes could disrupt the upward trend of gold, leading to a generally rising trend with gradually higher lows. If the Middle Eastern situation escalates into full-scale war, gold’s safe-haven properties will be more prominent, and the upward trend will be smoother. Conversely, if peace talks proceed smoothly, gold will revert to the logic of real interest rates, being more influenced by US monetary policy.