On July 10th, Schroders Global published an article stating that escalating geopolitical tensions and financial vulnerabilities are driving continuous growth in demand for gold. This may trigger one of the strongest bull markets since US President Richard Nixon closed the "gold window" in November 1971, ending the exchange between the US dollar and gold. Additionally, despite the continuous rise in the price of gold, the performance of gold stocks still lags behind the price of gold, and it is not exaggerated to say that gold stocks could potentially rise by 50% due to their relatively cheap valuation. If it is necessary to include gold stocks in long-term precious metal investment portfolios, the institution believes that now is the appropriate time. Between 2023 and 2024, despite Western investors continuously selling gold, the price of gold easily surpassed historical highs, with the current price exceeding $2300 per ounce. Central banks, investors, and households from Eastern countries have been continuously acquiring the gold sold by Western investors. This trend is not only led by China, but also by increased demand for gold in the Middle East and other regions. Although the price of gold continues to rise, the performance of gold stocks still lags behind. The main reason is that the price of gold is mainly driven by strong buying from Eastern investors, with a strong fundamental basis. However, due to Western investors having a pessimistic view of gold and the underperformance of some leading gold companies, the valuation of gold stocks has reached nearly the lowest levels in the past 40 years. Since the beginning of the year, the average price of gold has been $2200 per ounce. In the scenario where it is expected that cost inflation will significantly slow down, the profit margins and cash flow of the gold industry in 2024 are expected to improve significantly. The institution believes that these strong financial performances and regulatory policies will be the highlights of the financial markets, with profit margin growth and resulting cash flow being very robust. The institution believes that financial markets will find it difficult to ignore the strong cash flow and strict financial regulation of the gold industry, ultimately leading to an improvement in negative sentiment. It is not exaggerated to say that gold stocks could potentially rise by 50%, as they are still relatively cheap. The total market value of the entire gold stock market is currently around $300 billion, but it has been overlooked by investors for a long time. The institution believes that this situation will change. If it is necessary to include gold stocks in long-term precious metal investment portfolios, the institution believes that now is the appropriate time. The intensification of trade competition between China and the US has heightened geopolitical tensions. After the 2022 Ukraine crisis, European and American countries imposed sanctions on Russia, leading central banks of various countries to significantly increase their holdings of gold as currency reserves, with gold reserves reaching historical highs. In 2023, central banks in China, Singapore, Poland, and other countries became the largest buyers of gold, with the record purchases only increasing the proportion of gold reserves in total reserve holdings from 12.9% at the end of 2021 to 15.3% at the end of 2023. In the long run, the increase in gold holdings by central banks around the world reflects the evolving dynamics of global geopolitics and monetary or fiscal trends. During the period from 2022 to 2023, central banks bought more than 1,000 tons of gold, equivalent to 20% of global demand, and continued to buy at the same pace in the first quarter of 2024. This could have far-reaching effects. The tensions arising from the emerging major powers may not only lead to major reserve currencies facing financial difficulties, but also put pressure on developed economies and their fiscal vulnerabilities, which may drive a continuing wave of gold purchases. To be honest, the current size of the gold market is still not large enough. If the price of gold does not rise significantly, the market cannot bear a sustained volume of purchases, especially when other global investors are buying more or less at the same time. The demand from Chinese investors continues to grow. During the period from 2022 to 2023, Chinese households accumulated tens of trillions of dollars in savings on top of their already record high savings. They may be important participants entering the gold market. Additionally, the end of China's 30-year real estate bull market is a key factor causing a shift in investor attitudes towards gold. The institution believes that the increase in demand for gold by Chinese households is not a short-term phenomenon, but rather a lasting trend. Furthermore, Western investors have been consistently selling gold, but this has not prevented the price of gold from reaching new highs. Therefore, they are likely to transition from sellers to buyers in the coming quarters, becoming another key participant in the gold market. The buying (and selling) behavior of Western investors in the past often followed the direction of monetary policy. In 2024, there is still a possibility of periodic loose monetary policy and a future situation dominated by fiscal policy, prompting intervention by the Federal Reserve to maintain the solvency and liquidity of the government bond market. In this context, Western investors will continue to see gold as an important hedging tool and use it to hedge against central bank and sovereign default risks.