Zhi Tong Cai Jing·2025-11-02 23:53Core Viewpoint - The short-term outlook for gold remains uncertain with high volatility, and geopolitical risks are easing. Without unexpected positive factors, London gold is expected to consolidate before reaching new highs in the first quarter of next year [1][13]. Group 1: Recent Market Movements - The recent significant drop in gold prices is primarily due to high implied volatility and profit-taking after substantial gains, alongside a market that has over-priced geopolitical instability, particularly in U.S.-China relations and the Russia-Ukraine conflict, which have shown signs of easing [2][5]. Group 2: Long-term Bullish Logic for Gold - Macroeconomic Narrative: Since the pandemic, U.S. debt and fiscal deficits have expanded, with federal debt reaching historical highs. Concerns over the sustainability of U.S. Treasuries are impacting the international capital flow system. The expansion of the U.S. twin deficits is forcing a crisis transfer abroad, amidst rising global economic policy uncertainty and geopolitical risks. There are three potential solutions to the global debt issue: (1) unexpected high inflation that erodes debt, benefiting gold and commodities; (2) technological advancements leading to economic growth that mitigates debt, favoring AI technology; (3) proactive fiscal tightening, which may exacerbate domestic and international conflicts and reverse globalization [5][6]. Group 3: Supporting Factors for Gold Prices - Fundamental Factors: A decline in real interest rates continues to provide marginal support for gold prices. Following the October meeting, the Federal Reserve has initiated a new round of rate cuts and plans to halt balance sheet reduction in December, with ongoing monetary easing and rising inflation expected to support gold prices [9]. - Financial Factors: ETF investments and central bank purchases of gold remain key drivers for sustained price increases. Since late August, European investors have been notably absent. If the U.S. economy weakens further, European investors are likely to divest from dollar assets and reinvest in gold, potentially driving prices to new highs. Additionally, the ongoing global debt crisis is leading to a restructuring of the monetary credit system, de-dollarization, and a trend of central banks continuing to purchase gold, all of which will support gold price increases [10].