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

Golden Ten Data reported on April 11 that a research report from Huatai Securities noted that since March, geopolitical tensions have affected global risk appetite, yet gold did not perform its traditional safe-haven role. Instead, it moved in tandem with risk assets, both rising and falling together. Since the outbreak of the US-Israel-Iran conflict in March, gold’s maximum drawdown once exceeded 17%, but then rebounded from its bottom as the situation showed signs of easing. According to the institution, the reasons for the recent adjustment in gold include previously crowded positions, liquidity shocks, some central banks selling gold, and capital outflows to energy commodities. Looking ahead, in the short term, with the geopolitical tension in the Middle East easing, gold is rising alongside risk assets, reflecting that monetary policy factors are outweighing safe-haven attributes. In the medium and long term, short-term changes in the geopolitical situation have not undermined the underlying logic for gold, which includes the reshaping of the global order, risk of uncontrolled US debt, central bank gold purchases, potential Federal Reserve interest rate cuts, and a scarcity of safe-haven assets. The pricing framework combining real interest rates and central bank gold purchases still provides some explanatory power. Certainly, if the Federal Reserve enters a proactive rate hike cycle, this could also trigger significant adjustments in gold. Overall, gold faces multiple influencing factors in the short term; tail risks have diminished, but volatility remains high amid the interplay of various factors. Increasing positions during adjustments or waiting for volatility to subside before entering the market might be appropriate strategies.