Huatai Securities: Medium- and long-term asset reallocation logic for gold remains solid

Golden Ten Data reported on March 31 that a research note from Huatai Securities pointed out that the recent decline in gold prices was mainly driven by liquidity squeezes. When facing risks, investors tend to hold cash, which leads to the sell-off of assets such as gold. On one hand, escalating geopolitical tensions in the Middle East have put cash flow pressure on Gulf countries, causing gold to temporarily face pressure as funds shift from virtual to real assets. On the other hand, market concerns over stagflation combined with weakened expectations of interest rate cuts have intensified volatility in risk assets, triggering liquidity squeezes. The current macro scenario is similar to the 1973-1975 oil crisis, when gold prices experienced two rounds of declines followed by two rounds of gains. Back then, liquidity squeezes caused by risk aversion and economic recession were the main reasons for declines in gold prices, while stagflation and ample liquidity fueled two rounds of rallies. The logic for reallocating into gold as a medium- to long-term asset remains solid; it is crucial to grasp the pace of investment during risk events.