Since the U.S. election, both China and the U.S. have been competing for gold

Recently, driven by the "central bank gold buying frenzy," Goldman Sachs has raised its year-end target price for gold. After all, in December 2024 alone, global central banks purchased 108 tons of gold.

On February 18, Barclays also released a report stating that although gold reached a new high this year, it may continue to rise for three reasons:

First, de-dollarization has become a long-term favorable factor, driving demand for gold as a safe-haven asset; second, the demand for gold from China and Western countries, especially the United States, is on the rise; third, although rising U.S. interest rates may pose some downside risks to gold, these risks are likely to be short-term and limited in impact. Barclays still expects the Federal Reserve to cut rates by 25 basis points once this year.

According to Barclays' model, as of January, the rise in gold prices is consistent with its driving factors, and although Barclays has not yet obtained the complete dataset for February, current data indicates that gold will continue to face upward pressure.

Demand for Gold is Rising in China and the U.S.

Recently, China's demand for gold has rebounded, mainly driven by central bank purchases.

After a six-month pause, the People's Bank of China resumed gold purchases since last November. Barclays pointed out that typically, once a central bank starts buying gold, it often enters a long-term purchasing cycle.

Barclays added that in the face of broader external risks, the People's Bank of China may continue to promote diversification of its foreign exchange reserves, bringing the proportion of its gold reserves closer to the global average.

In addition to China, Western countries' demand for gold is also significantly increasing.

Since the U.S. elections, global physical demand for gold has surged, with U.S. demand being particularly prominent. U.S. COMEX gold inventories have increased by 120% since November, while the London Metal Exchange (LBMA) has seen a decline in gold and silver inventories.

Barclays stated that Canada and Mexico are among the top five source countries for U.S. gold imports, and the tariffs planned by the Trump administration on these two countries do not exclude precious metals from potential impacts.

Furthermore, due to tariff expectations leading to a premium on U.S. gold prices, a large amount of gold has been transferred from global vaults and bullion banks to the U.S. in the past two months.

For example, historically, Switzerland and the UK have been the two major markets for U.S. gold exports, but since December 2024, trade flows have reversed: Switzerland's gold exports to the U.S. surged to 64.5 tons, increasing elevenfold since November; during the same period, Switzerland's gold exports to London skyrocketed to 14.3 tons, a fourteenfold increase from the previous month, indicating that Swiss gold is flowing to the U.S. through direct and indirect channels

Gold Rises in Line with Its Driving Factors

Barclays' model indicates that as of January, the rise in gold is consistent with its driving factors, and although Barclays has not yet obtained the complete dataset for February, current data suggests that gold will continue to face upward pressure. The specific model is as follows:

Using a 5-year rolling regression model of real yields and the dollar, the average R-squared for gold is about 60%, with the predicted current gold price around $2,100 per ounce, significantly lower than the spot price. However, when central bank demand and uncertainty are included in the regression analysis, the average R-squared jumps to 81%, and the gap with the spot price nearly disappears.

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