Core Insights - China's gold consumption in Q1 2025 reached 290.492 tons, a year-on-year decrease of 5.96% [1] - The demand for gold jewelry fell by 26.85% to 134.531 tons, while the consumption of gold bars and coins increased by 29.81% to 138.018 tons [1][2] - The high gold prices have suppressed jewelry demand, while investment demand for gold bars and coins has surged due to geopolitical uncertainties and economic instability [2][4] Consumption Trends - The decline in gold jewelry consumption reflects a broader downturn in jewelry demand, exacerbated by rising gold prices and increased brand premiums [2] - Conversely, the investment demand for gold bars and coins has risen significantly, indicating a shift towards viewing gold as a safe-haven asset [2][4] Market Activity - The Shanghai Gold Exchange reported a total trading volume of 16,000 tons and a trading value of 10.70 trillion yuan, marking increases of 4.57% and 42.85% respectively [3] - The Shanghai Futures Exchange saw a trading volume of 55,400 tons, with a trading value of 30.52 trillion yuan, reflecting growth rates of 91.17% and 143.69% respectively [3] - Domestic gold ETF holdings increased by 23.47 tons, a year-on-year growth of 327.73%, reaching a total of 138.21 tons by the end of March [3] Global Demand - The World Gold Council reported a 3% increase in global demand for gold bars and coins, reaching 325 tons, driven primarily by retail investment in China [4] - In contrast, demand in the U.S. fell by 22%, while Europe saw only a modest increase, highlighting a divergence in market trends [4] Economic Context - The current high volatility in gold prices is influenced by macroeconomic factors, including trade disputes and geopolitical tensions, which have heightened investor uncertainty [5][6] - The ongoing economic instability is expected to sustain or increase gold's appeal as a safe-haven asset, potentially driving further demand in the coming months [6]

Quantitative Models and Construction Methods - **Model Name**: Huatai Three-Cycle Model **Model Construction Idea**: The model analyzes the price movement of COMEX gold settlement prices using three classic economic cycles: Kitchin, Juglar, and Kuznets cycles. It identifies the dominant cycle components influencing gold price trends[17] **Model Construction Process**: 1. The model decomposes the year-on-year sequence of COMEX gold settlement prices into three cycle components: Kitchin, Juglar, and Kuznets cycles 2. The amplitude of the extracted cycle components is ranked as Kuznets > Juglar > Kitchin 3. The current positions of the Kuznets and Juglar cycles are analyzed to predict future gold price trends[17][19] **Model Evaluation**: The model highlights that gold prices are more influenced by longer-term cycles (Kuznets and Juglar) compared to shorter-term cycles (Kitchin), providing insights into the strong cyclical positioning of gold in the current market[17] Model Backtesting Results - **Huatai Three-Cycle Model**: The model indicates that the Kuznets cycle is near its peak, and the Juglar cycle is in an upward phase, suggesting that gold prices are likely to remain strong in the near term[17][19] Quantitative Factors and Construction Methods - **Factor Name**: Gold as a Portfolio Stabilizer **Factor Construction Idea**: Gold is evaluated as a low-correlation asset with high long-term returns, making it a potential stabilizer in diversified investment portfolios[3][21] **Factor Construction Process**: 1. Historical performance of gold is compared with other major asset classes (e.g., equities, bonds, commodities) over different time horizons (1 year, 5 years, 10 years, 20 years) 2. Risk-return metrics such as Sharpe ratio, Calmar ratio, and maximum drawdown are calculated for gold and other assets 3. Correlation analysis is conducted to assess gold's relationship with other asset classes[21][23][24] **Factor Evaluation**: Gold demonstrates high returns, low volatility, and low correlation with other assets, making it a valuable addition to investment portfolios for risk diversification and return enhancement[21][23] - **Factor Name**: Gold in Asset Allocation Portfolios **Factor Construction Idea**: The impact of adding gold to a traditional stock-bond portfolio is analyzed to evaluate its contribution to portfolio performance[3][24] **Factor Construction Process**: 1. A baseline portfolio is constructed with 60% bonds (ChinaBond New Comprehensive Wealth Index) and 40% stocks (CSI A500 Index) 2. Two new portfolios are created by reallocating 10% of the baseline portfolio to gold (AU9999 spot gold): - Portfolio A: 50% bonds, 40% stocks, 10% gold - Portfolio B: 60% bonds, 30% stocks, 10% gold 3. Monthly rebalancing is applied, and backtesting is conducted over the period from January 3, 2005, to February 19, 2025 4. Risk-return metrics (e.g., annualized return, Sharpe ratio, maximum drawdown) are calculated for all portfolios[24][26] **Factor Evaluation**: Adding gold improves portfolio Sharpe ratios and reduces volatility, demonstrating its role as a stabilizing asset in diversified portfolios[26] Factor Backtesting Results - **Gold as a Portfolio Stabilizer**: - Sharpe Ratio: 0.59 (AU9999 spot gold), 0.57 (London spot gold), 0.56 (COMEX gold futures) - Maximum Drawdown: -44.88% (AU9999 spot gold), -44.62% (London spot gold), -44.52% (COMEX gold futures) - Annualized Return: 9.07% (AU9999 spot gold), 9.76% (London spot gold), 9.74% (COMEX gold futures)[23] - **Gold in Asset Allocation Portfolios**: - Portfolio A: Annualized Return 7.17%, Sharpe Ratio 0.72, Maximum Drawdown -35.47% - Portfolio B: Annualized Return 6.69%, Sharpe Ratio 0.88, Maximum Drawdown -26.86% - Baseline Portfolio: Annualized Return 6.63%, Sharpe Ratio 0.68, Maximum Drawdown -33.36%[26]