The price of gold has been on a remarkable ascent, showing unprecedented gains and leaving many investors wondering what the future holds for this precious metalWill it continue to rise, or is now the time to invest?

As of March 20, the spot price of gold soared to over $2000 per ounce, a level not seen since March 2022. On that day, the main gold futures contract in China also experienced a substantial increase, corresponding with significant gains in the A-share gold concept sector.

During a field investigation in Shanghai, several major gold jewelry retailers indicated that the retail price for pure gold now exceeds 570 RMB per gram, while investment-grade gold has similarly surpassed 510 RMB per gram.

Industry experts attribute the surge in gold prices to systemic risk concerns following banking turmoil in Europe and the US, which has revived expectations for a more accommodative Federal Reserve policy

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Coupled with a heightened demand for safe-haven assets, precious metals are likely to continue gaining strengthShould these macroeconomic factors persist, the likelihood of gold surpassing its historical highs becomes substantialEven in the event of risk containment, potential price corrections can be expected due to persisting expectations for policy accommodation, economic downturn concerns, and investment demand, although this could take longer to manifest.

The Surge in Gold Prices

On March 20, the spot price of gold not only surpassed $2000 per ounce but also climbed more than $30 from its daily lowThe COMEX futures market witnessed trading above this psychological threshold, sitting just shy of the all-time high of $2089 per ounce reached in August 2020. The weekly price gain last week alone was an impressive 6%.

On the same day, gold futures contracts on the Shanghai Futures Exchange saw active trading and price increases

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The main gold futures contract opened at 435.18 RMB, closing at 445.02 RMB with a notable 3.07% increase and a trading volume of 234,500 contracts; the open interest also climbed by 10,682 contracts.

Additionally, shares related to gold on the A-share market showed significant gainsStocks like Zhongrun Resources and Sichuan Gold were locked at the daily limit, while Chifeng Jin Jian and Western Gold surged over 9%.

In discussions with various gold jewelry brands in Shanghai, the retail price for pure gold was consistently above 570 RMB per gram, with investment-grade gold also climbing past 510 RMB per gram.

"Today, our retail price for pure gold is 576 RMB per gram

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Gold prices have indeed surged wildly recently, rising over 20 RMB per gram just in the past week," said a salesperson from a Chinese gold retail outlet.

"The increases have been astonishing; in fact, gold prices have been on an upward trajectory since the end of February," another sales representative from a Chow Tai Fook store noted.

According to the public price display from Chow Tai Fook, the retail price for pure gold reached 576 RMB per gram, while investment-grade gold stood at 516 RMB per gram.

Aggressive Gold Purchases

Despite the soaring prices of gold, enthusiasm for gold investment remains unabated

An anonymous investor shared that they consistently invest 10 grams of gold via a regular investment program at a prominent Chinese bank each month.

"Over the past few years, gold prices have remained relatively stable, making it a favorable choice for investmentIt also serves as a form of enforced savings, costing me around 4000 RMB monthly to purchase gold," the investor explained.

The investor specified that their decision to invest in gold stems partly from a scarcity of appealing financial products currently available, and the desire to diversify their asset allocation through gold investments.

Interestingly, it's not just individual retail investors purchasing gold; central banks around the globe are significantly increasing their gold reserves

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According to reports from the World Gold Council, central banks globally added a net total of 1136 tons of gold in 2022, representing a staggering year-on-year increase of 152.31%, reaching a new historical heightThis represents the thirteenth consecutive year of net gold accumulation and marks a record not seen since data collection began in 1950. Recent adjustments indicate that the purchasing scale for central banks will further expand, with net acquisitions for January being upgraded from 31 tons to 77 tons.

Additionally, the People's Bank of China reported that as of late February, China’s official reserves included approximately 6.59 million ounces of gold—around 2050 tons—increasing by 1.23% from the previous period, with about 25 tons purchased over the last four months.

Experts highlight several reasons why central banks are aggressively increasing their gold holdings, including:

Firstly, the instability of the US dollar has catalyzed a noticeable trend of de-dollarization

Over the last two decades, the Federal Reserve has been printing money extensively, leading to excess liquidity and reduced trust in the dollar; current risks posed by crises in European and American banks have amplified concerns regarding systemic stability and consequently driven a surge in gold demand.

Secondly, there is an increasing need for diversification in foreign exchange reserves to mitigate investment risksWith current instability surrounding currencies and government bonds, central banks are looking to enhance their gold reserves in order to reduce their reliance on the dollar and US Treasury bonds.

Lastly, the growing demand for safe-haven assets is driven by unprecedented global turmoil

While the pandemic is nearing its conclusion, geopolitical tensions, economic downturns, and vulnerabilities within credit systems remain prominentThis fosters an ongoing demand for gold as a safe haven alongside fears of sovereign debt crises.

Is It Still Worth It to Invest?

In light of the recent rise in gold prices, a futures analyst weighed in on this situation, indicating that much of this uptick can be attributed to increased market anxieties following recent banking crises in the West and tempered expectations for Federal Reserve interest rate hikes.

The analyst elaborated, “Given the rapid rate increases by The Federal Reserve and other central banks, systemic risks have become increasingly evident in the bank sector, leading to a panic-driven market sentiment

However, there is a shift in monetary policy expectations from hawkish to dovish, which has paved the way for an upward trend in gold prices.”

Looking towards the future, will gold prices remain on this upward trajectory? Is it still a prudent time to invest?

“Short-term risks related to the banking sector are likely manageableThe swift actions taken by the Federal Reserve and various financial authorities reflect a serious commitment to stabilizing concernsHowever, one must remain cautious about the potentially bearish impacts of diminishing risk sentiment,” the analyst pointed out“In the medium to long term, we maintain a bullish outlook on gold prices, as the measures taken to bolster the banking system only address superficial issues

Given ongoing economic stagnation and credit tightening fears, the demand for gold as a hedge against inevitable downturns will only strengthen,” she affirmed.

The analyst concluded that while gold has considerable potential for continued upward movement, it may be prudent to wait for a price correction offering a more favorable entry point.

“Currently, there are two major uncertainties in the market,” the analyst indicated“Firstly, systemic risks in the US and European banking sectors are still persistentAuthorities are taking measures to manage the situation; thus, it remains essential to monitor whether these risks worsen further,” she noted.

“Secondly, there has been a rapid shift in the monetary policy expectations of the central banks in the West