As the gold price hits new highs, ICMA senior advisor warns: "Gold is cold at the top!"

According to the Zhitong Finance and Economics APP, against the backdrop of strong US economic data and escalating geopolitical tensions, the price of gold on Monday continued its recent upward trend, hitting a new high. Data shows that the spot gold price in London broke through $2300 per ounce on Monday, reaching as high as $2354.04 per ounce, once again hitting a historical high.

During times of financial uncertainty, gold is usually seen as a safe-haven asset. Despite high US interest rates and a relatively strong US dollar, the price of gold continues to hit new highs. Some on Wall Street expect the strong performance of gold to last at least until the second half of this year. Citigroup previously described gold as a "recession hedge" for developed markets, while others believe that the Russia-Ukraine conflict and tensions in the Middle East may further support gold prices.

However, not everyone is optimistic about gold continuing to rise. Bob Parker, Senior Advisor at the International Capital Markets Association (ICMA), said: "I think there are two factors driving the rise in gold prices. The first factor is what I call the catch-up effect. If you look at the performance of gold relative to global stock markets last year and early this year, you will find that gold has significantly lagged behind. Investors see poor performance in gold, so they increase their exposure to gold." "Related to this is actually the correlation between gold and bitcoin, although people may argue whether this makes sense, but in fact, there is a correlation between bitcoin and gold."

Bob Parker added: "Another factor that is difficult to obtain data on is that I do believe that some central banks are buying gold (especially central banks in Asia), increasing their gold asset allocation in their foreign exchange reserves."

Looking ahead, Bob Parker suggests that the fundamentals of gold seem to paint a bearish picture, as the US dollar strengthens, US bond yields rise, doubts about the Fed's rate-cutting path spread, and inflation remains "reasonably" low. He said: "To be honest, all these factors actually indicate that there is very little room for gold prices to rise. I think gold prices are now very vulnerable to a decline."

Market participants have been closely watching comments from Federal Reserve officials on the number of rate cuts that may occur this year. Last month, the Fed kept the federal funds rate unchanged at 5.25%-5.5% for the fifth consecutive time, in line with market expectations. The Fed's dot plot shows that policymakers still expect three 25-basis-point rate cuts this year. However, recent comments from some Fed officials suggest that if inflation falls slowly, there is a possibility that there will be no rate cuts this year. In addition, the US March non-farm payrolls data released last Friday far exceeded expectations, causing market expectations for Fed rate cuts this year to cool down.

Edmund Shing, Chief Investment Officer at BNP Paribas Wealth Management, said: "We have been very bullish on precious metals for some time. So this (gold price trend) is obviously good, but even we are a bit puzzled by the strong performance of gold." "The interesting thing about gold is that, I think, from a medium-term perspective, it is very encouraging that the momentum of gold has completely broken away from its traditional correlation with real interest rates and the US dollar." "

Edmund Shing stated that due to investors looking "further ahead" on issues such as debt sustainability, the gold price seems to have received some boost. Like Bob Parker, he also emphasized the role of central bank demand in boosting the gold price. He said, "Let's not forget that central banks around the world, especially those in China, India, and emerging markets, have been steadily accumulating gold."

It is worth noting that as the gold price continues to rise, silver, another precious metal, has recently shown strong performance as well. On Monday, the London spot silver price broke through $28 per ounce, reaching as high as $28.08 per ounce, hitting a new high in nearly three years. Gold and silver prices have traditionally shown a strong positive correlation, although silver is sometimes described as the "poor relative" of gold.

In response to this, Edmund Shing said, "What may be more exciting now is the reaction we see in other precious metals, especially silver. Silver is finally catching up, but it is still far, far away from the historical high of $50 per ounce set in 2011." Analysts have previously suggested that silver's performance in the second half of this year seems to surpass that of gold."

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