Gold prices return to $5,200! Precious metals collectively surge. Maintain an optimistic outlook for 2026?

The first trading day of the Year of the Horse for A-shares saw the precious metals sector leading the gains on the morning of February 24. Hunan Silver hit the daily limit, Xiaocheng Technology surged over 10%, while Sichuan Gold, Shenda Resources, Industrial Silver & Tin, and Zhaojin Gold also posted strong gains.

During the Spring Festival holiday (February 15–23), gold and silver prices both experienced volatile strengthening. COMEX gold rose 4% and regained above $5,200; COMEX silver surged 12.87% and returned above $85.

Clear Increase in Risk Aversion Sentiment

Market consensus indicates that the recent strength in gold and silver is closely related to rising risk aversion, driven mainly by two factors: tariffs and geopolitical issues.

Regarding tariffs, Tokai Futures stated that the U.S. Supreme Court ruled 6:3 that former President Trump’s use of the International Emergency Economic Powers Act to impose reciprocal tariffs was invalid. Subsequently, Trump signed an executive order imposing a 10% temporary comprehensive tariff under Section 122 of the Trade Act of 1974, which was further increased to 15% on February 21, along with an investigation. Changes and uncertainties in tariff policies continue to exert pressure on the economy. The Supreme Court did not clarify whether tariffs would be reinstated, and local lawsuits could take a long time to resolve. Trump’s administration’s powers are somewhat limited, and future policies may become more aggressive.

Geopolitical tensions also remain high. Currently, U.S.-Iran negotiations have made no substantial progress, and the U.S. continues to amass troops around Iran. Additionally, Israel has conducted airstrikes in Lebanon again and is attempting to change the status quo in the West Bank.

On February 23, CCTV reported that while the U.S. and Iran signaled willingness to negotiate, the risk of U.S. military strikes on Iran still exists. On February 22, Russia’s Sputnik News Agency cited former CIA officials suggesting that the U.S. might launch military action against Iran on February 23 or 24.

According to another report from CCTV, on February 22, U.S. President Trump reportedly told advisors he was “inclined to carry out a preliminary strike on Iran in the coming days,” followed by a larger-scale military operation in the coming months to force Iran to “yield” and reach an agreement favorable to the U.S.

Federal Reserve’s 2026 “Dovish to Hard” Policy Outlook

Additionally, some market voices believe that the rebound of gold and silver after a historic plunge is supported by the Federal Reserve’s policy stance remaining dovish rather than tightening by 2026, which is positive for precious metals.

Haitong International noted that since Powell’s nomination, market debates around “new officials’ first moves” (cutting rates, shrinking balance sheets, inflation as an option) have intensified, especially regarding hawkish expectations of balance sheet reduction, causing global asset volatility. However, the Fed’s short-term focus in 2026 is likely to be on rate cuts rather than balance sheet reduction.

The Fed finds it difficult to shrink its balance sheet primarily due to political constraints, as balance sheet reduction conflicts with Trump’s goal of lowering debt costs. Actual reduction may wait until the next presidential term. Moreover, market constraints played a role; the Fed only began expanding its balance sheet in December last year to ease liquidity shortages.

Haitong International previously estimated that, in the global context, the U.S. is currently at the forefront of low inflation. When measured by a three-month average annualized seasonally adjusted rate (3M SAAR), the core inflation rate has been below the Fed’s 2% target for two consecutive months and is lower than most developed markets, opening room for rate cuts that could be larger and sooner than expected.

Optimistic Outlook for 2026?

From a longer-term perspective, a weakening U.S. dollar credit also benefits gold and silver. A recent report from Huaxi Securities stated that the long-term foundation of the dollar’s credit is unstable. From a spread perspective, the interest rate differentials between the U.S. and other major economies may continue to narrow, weakening the dollar. The Fed’s independence is also under threat, and the U.S.’s expanding debt and heavy interest burdens heighten global concerns about the sustainability of U.S. debt and dollar credibility.

In fact, institutions are generally optimistic about the future of gold and silver. CITIC Securities expressed a positive outlook for gold prices throughout 2026. As the gold market’s bull run continues, positive sentiment in precious metals could spill over into base metals, supporting a continued bull market in the sector. UBS also pointed out that global gold demand will surpass 5,000 tons in 2025, driven by stronger investment flows and ongoing central bank purchases, which will further push gold prices higher.

(Source: Oriental Wealth Research Center)