CITIC Securities: How do you see the future market of gold and Bitcoin?

Zhitong App learned that CITIC SEC has released a research report stating that both gold and Bitcoin have performed well in the past two weeks, and the medium to long-term analysis framework is not sufficient to explain the rapid upward movement in the short term. The bank believes that the rise in gold and Bitcoin is related to the increase in risk aversion caused by recent geopolitical events. Looking ahead, the bank believes that these event factors still favor gold and Bitcoin, but to a limited extent; however, close monitoring is still needed. Gold is also positively influenced by central bank buying. Bitcoin is positively affected in the short to medium term by the "halving" and ETF investments, but significant volatility is expected.

CITIC SEC's views are as follows:

In the past one to two weeks, the rise in gold and Bitcoin has been very significant.

In the trading days of the past week (3.04~3.08), COMEX gold futures rose by about 4.52%, while in the past two weeks (2.26~3.08), it rose by about 6.90%. The price of Bitcoin rose by about 9.74% in the past week (3.02~3.08) and by 32.69% in the past two weeks (2.24~3.08). Both have reached new all-time highs.

The appreciation of gold is supported by medium to long-term factors but cannot be fully explained.

The downward trend in nominal US interest rates driving real interest rates down, and the increase in global central bank holdings of gold, are two factors that the bank emphasizes in the gold analysis framework. Although these two factors have continued to develop in favor of gold in the past one to two weeks, whether it is the extent of the decline in US bond yields, news of central banks in emerging economies buying gold, or the Fed's easing expectations triggered by liquidity crises in small and medium-sized banks, none of these factors can fully explain the significant upward movement of gold in the short term.

The bank believes that the most significant marginal positive factor lies in the turmoil of the geopolitical situation favoring safe-haven assets.

A series of events have occurred intensively in the past two weeks, including: France's tough stance, Germany's ambiguous stance on the Russia-Ukraine conflict, the murky situation between Russia and Ukraine; Egypt's exchange rate fluctuations and sovereign debt crisis; the deadlock in Israeli-Palestinian conflict negotiations; and multiple national elections. The turmoil in the geopolitical situation and the increase in risk aversion triggered by these events are favorable for the upward movement of safe-haven asset prices.

The approval of Bitcoin spot trading by the US SEC in January was an important positive factor for Bitcoin. However, for the recent rapid upward movement, the most important positive factors are still its safe-haven properties and the upcoming "halving".

The enthusiasm for trading in East Asian countries has driven the price of Bitcoin up.

In 2015-2016, the Chinese yuan accounted for almost all Bitcoin transactions, driving trading volume to historical highs while Bitcoin rapidly rose. The most important incremental traders in the current Bitcoin market are East Asian investors who can only invest in Bitcoin spot ETFs.

For gold and Bitcoin, the good performance in the medium to short term still depends on how the geopolitical situation evolves. The bank believes that there are still positive factors in the future, but to a limited extent, or not as much as in the past two weeks. Key variables lie in the progress of US aid to Ukraine and the bipartisan political situation.At the end of the US dollar interest rate hike cycle, it is often a landmark event when edge countries in the global financial system fall into a debt crisis. Such an event has not yet occurred in this rate hike cycle, so it is important to continue monitoring closely. Gold and Bitcoin may still benefit.

Regarding gold, it is crucial to closely monitor the gold-buying actions of central banks worldwide, with the most important indicator being the changes in holdings by the People's Bank of China in March.

As for Bitcoin, historically, there is still an upward trend before and after the "halving"; the bullish factors of the East Asia-North America interest rate spread are expected to diminish after the Fed starts cutting rates. However, the market's current upward momentum is weak, and future volatility is expected to remain significant.

Risk factors include escalating geopolitical risks, US dollar liquidity risks, and the possibility of the Fed's monetary policy being less accommodative than expected.