Core Viewpoint - The article highlights significant fluctuations in the foreign exchange market, particularly the decline of the US dollar and the rise of the Chinese yuan, alongside Moody's decision to maintain China's sovereign credit rating, which has drawn market attention [1][9]. Currency Market Dynamics - On May 26, the US dollar index fell to 98.6921, marking a three-week low, while both onshore and offshore yuan appreciated, with the offshore yuan (CNH) breaking the 7.17 mark, reaching a high of 7.16155, the highest since December 2024 [1][3]. - The offshore yuan has seen a decline of over 2500 basis points in just over a month, influenced by concerns over the US's dual deficits following Moody's downgrade of the US credit rating from Aaa to Aa1 [6]. Monetary Policy Insights - The Federal Reserve's latest meeting minutes indicated a "hawkish wait-and-see" stance, pushing back rate cut expectations to September, while disappointing durable goods orders data led to short-term profit-taking on the dollar [8]. - Goldman Sachs' forex strategy team suggests that if the dollar index continues to decline, the yuan may test the 7.15 resistance level, but the second half of the year will depend on the divergence in monetary policies between China and the US [8]. Government and Economic Response - Moody's maintained China's sovereign credit rating at "A1" but kept the outlook negative, citing structural challenges in economic growth, including real estate adjustments and local debt risks. However, short-term fiscal stimulus and central bank support provide a buffer [9]. - The Chinese Ministry of Finance responded positively to Moody's decision, highlighting the government's macroeconomic policies since last year's fourth quarter, which have led to improved economic indicators and enhanced market confidence [9].

Group 1: Impact Mechanisms on Gold Prices - The decline in real interest rates due to interest rate cuts enhances the attractiveness of gold as a zero-yield asset, typically leading to price increases [1] - The release of long-term liquidity, estimated at 1 trillion yuan, may partially flow into the commodity market, including gold, with historical data showing strong gold performance during periods of monetary easing [2] - A depreciation of the RMB due to interest rate cuts could lead to a passive increase in gold prices denominated in RMB, as seen during the RMB depreciation in 2020 [3] - Easing monetary policy may stimulate economic demand and, combined with supply chain pressures, could elevate inflation, increasing the demand for gold as an inflation hedge [4] Group 2: Historical Case Studies - In 2015, following five interest rate cuts by the People's Bank of China, the price of Au9999 on the Shanghai Gold Exchange rose by 6.3%, while the Shanghai Composite Index fell by 14.3%, indicating a shift of risk-averse funds towards gold [5] - In 2020, amid a global easing trend with the Federal Reserve cutting rates to zero and implementing unlimited quantitative easing, international gold prices surged by 25%, reaching a historical high [6] Group 3: Current Market Specificities - The divergence in monetary policies between the US and China, with the Fed maintaining high rates while China cuts rates, may exacerbate RMB depreciation pressure, potentially widening domestic gold premiums [7] - Geopolitical risks, such as the Russia-Ukraine conflict and tensions in the Middle East, are creating a resonance between risk aversion and monetary easing, further supporting gold demand [8] - The recent rate cuts and reserve requirement ratio reductions are favorable for gold, but external policies and geopolitical risks should be monitored [9]