Investment Rating - The report maintains an "Overweight" rating for both the non-ferrous metals and precious metals sectors [7]. Core Views - Recent declines in gold prices are primarily attributed to liquidity squeezes, as investors prefer holding cash during risk events, leading to the liquidation of gold and other assets [1][2]. - The geopolitical tensions in the Middle East and concerns over stagflation combined with weakened interest rate cut expectations have intensified volatility in risk assets, contributing to liquidity pressures [1]. - Historical parallels are drawn to the 1973-1975 oil crisis, where gold prices experienced a cycle of declines and recoveries influenced by liquidity events and economic downturns [4]. Summary by Sections Market Dynamics - The recent drop in gold prices is linked to a significant reduction in net long positions held by asset management institutions, which fell by 32% from 134,000 contracts on January 13 to 91,000 contracts by March 24, marking a one-year low [2]. - The current market environment reflects a shift away from gold's traditional role as an inflation hedge due to liquidity squeezes, although the reduction in long positions may signal a nearing end to selling pressure [2]. Macro Environment - Gold is currently under "de-virtualization" pressure, particularly in cash-strapped Gulf countries facing physical shortages of goods, leading to a rational choice to liquidate high-yielding gold for essential items [3]. - The report notes that global central bank and private sector gold holdings are at historical highs, with the proportion of gold in reserves expected to rise from 12.8% in 2020 to 24.5% by the end of 2025 [3]. Historical Context - The report outlines the price movements of gold during the 1973-1974 oil crisis, where gold prices initially rose following the outbreak of the Yom Kippur War, then fell due to liquidity issues, before experiencing a significant recovery as economic conditions stabilized [4]. Future Outlook - Despite short-term pressures, the report remains optimistic about gold's long-term value as a hedge against risk, driven by factors such as de-dollarization and unsustainable fiscal policies [5]. - The potential for gold prices to rise to $5,400-$6,800 per ounce is highlighted if the proportion of investable gold exceeds 4.3%-4.8% by 2026-2028, compared to 3.6% in 2011 [5].