There were "two major changes" in the gold market last week, which are very important for gold prices

Deutsche Bank found that the gold market experienced two significant changes last week, and these changes could be lasting positives.

According to a report released by Deutsche Bank on April 14, these two changes are the divergence in performance between gold and U.S. Treasury bonds and the significant decline in China's gold premium.

First, Deutsche Bank analyst Michael Hsueh noted that last week, there was a clear divergence in the daily performance of gold and 30-year U.S. Treasury bonds, indicating that investors may be viewing gold as an alternative hedge against risk assets.

Secondly, last Friday, China's gold premium dropped sharply from USD 51 per ounce to USD 15 per ounce, reaching a new low since April 2. Deutsche Bank believes this is related to the People's Bank of China allocating additional gold import quotas to some commercial banks.

According to a report by Sina Finance on April 14, some media outlets cited sources saying that the People's Bank of China has issued new gold import quotas to some commercial banks in response to strong risk-averse demand from institutions and retail investors.

Deutsche Bank believes this decision was likely implemented last Friday, and the significant decline in China's gold premium indicates that the market's supply tightness has been effectively alleviated.

Hsueh pointed out that last week's situation further validated their judgment: China's gold premium reflects suppressed demand, and the issuance of import quotas is alleviating this supply-demand imbalance. If this judgment holds, it means that this round of gold price increases is not driven by an expansion of the gold premium, but rather by actual purchases brought about by new imports, which in turn leads to a decrease in the premium.

Recently, there has also been an interesting pattern in international gold prices: gold prices often see a significant increase after the Chinese market opens. This phenomenon corroborates Deutsche Bank's analysis, indicating that strong demand from Chinese investors for gold may be having a substantial impact on global gold prices.

Deutsche Bank pointed out that the only question now is: how long will commercial banks take to exhaust this batch of new gold import quotas? Deutsche Bank noted that the narrowing of premiums in the market last Friday, combined with a reasonable inference—that the central bank would not release quota information before commercial banks have executed new orders—suggests that favorable factors for gold price increases may have already begun to take effect in the market.

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