Gold and silver hit record highs: The underlying logic of the precious metals bull market and future market positioning

On December 22, spot gold broke through $4,380 per ounce and silver rose above $68 per ounce, both hitting new all-time highs, while Hong Kong-listed precious metals concept stocks also rallied. This round of precious metals bull market is not just driven by speculative capital, but rather the combined effect of expectations for interest rate cuts by the Federal Reserve, inflation trends, and global risk aversion sentiment. Its sustainability and investment timing need to be analyzed from both fundamental and market sentiment perspectives.

I. Core Drivers Behind Precious Metals' Record Highs

1. Strong Catalysis from Fed Rate Cut Expectations
   The unexpected cooling of U.S. CPI in November led to upward revisions in market expectations for the extent of Fed rate cuts by 2026, directly reducing the attractiveness of the U.S. dollar and Treasury yields. As a "non-yielding asset," gold's holding cost decreases during a rate-cutting cycle, while silver benefits from the dual resonance of its industrial and financial attributes, making both key hedges against interest rate risks.
2. Global Geopolitical and Economic Safe-Haven Demand
   Ongoing geopolitical conflicts and sluggish economic recovery in major economies have heightened market risk aversion. The "safe-haven asset" nature of precious metals has been reinforced, with institutional and retail capital continuously flowing into gold ETFs, silver futures, and similar products, creating a positive feedback loop.
3. Marginal Support from Supply-Demand Dynamics
   Slow expansion of new gold mining capacity and continued central bank gold purchases (especially by emerging market central banks) provide rigid support for gold supply. Meanwhile, silver benefits from growing industrial demand in sectors like photovoltaics and new energy vehicles, with its supply-demand gap gradually widening, underpinning price increases.

II. Sustainability of the Precious Metals Bull Market

1. Bullish Factors: Rate Cut Cycle and Safe-Haven Demand Persist
   U.S. economic data suggests a higher probability of a "soft landing," with the timing and magnitude of Fed rate cuts likely exceeding earlier expectations, which will continue to support precious metals prices. Additionally, global geopolitical uncertainties are unlikely to dissipate soon, meaning safe-haven demand for precious metals will not fade quickly.
2. Potential Bearish Factors: Profit-Taking After Overbought Conditions and Data Volatility
   The sharp short-term rally in gold and silver prices has created technical correction risks. If subsequent U.S. CPI or non-farm payroll data rebound, it may trigger a market reassessment of rate cut expectations, leading to temporary declines in precious metals. Moreover, a potential rebound in the oversold U.S. dollar index could also pressure precious metals prices.
3. Divergence Between Metals: Silver's Outperformance Over Gold
   Silver's industrial applications account for about 50% of its demand, and its fundamentals are improving faster than gold's due to growth in new energy industries. Gold, meanwhile, is more driven by financial attributes and exhibits relatively stable volatility. If rate cuts materialize, silver's upside potential will significantly outpace gold's.

III. Investment Strategies for the Precious Metals Sector

1. Spot and Futures: Seize Opportunities After Corrections
   Short-term gold and silver prices may correct due to overbought conditions. Investors can wait for pullbacks to key support levels ($4,200/oz for gold and $65/oz for silver) to accumulate physical gold/silver or use futures contracts to capture trend opportunities, with strict stop-loss and take-profit levels.
2. Equities: Focus on Industry Leaders
   Hong Kong and A-share gold/silver mining stocks directly benefit from price rallies. Prioritize leading companies with strong resource reserves and low production costs. Silver's industrial demand growth also favors photovoltaic silver paste and new energy silver-related firms, offering niche opportunities.
3. Funds and ETFs: Diversified Allocation
   Retail investors can participate via gold ETFs or precious metals-themed funds to avoid the leverage risks of direct futures trading. Allocate 10%-15% of total assets as a hedge against market risks.
4. Risk Management: Monitor Expectation Gaps and Policy Shifts
   Closely track Fed meeting statements, U.S. inflation, and employment data. Reduce exposure if rate cut prospects reverse. Also, watch for central bank gold sales and mining capacity changes to avoid chasing rallies blindly.

The precious metals bull market is ultimately a product of macroeconomic and policy cycles. Despite current high prices, the broader rate-cut trend remains intact. Investors should avoid overreacting to short-term volatility and instead adopt phased allocation and diversified metal exposure to capture long-term value.$Gold(20328.HK)