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March 2026 Chinese Import Run-Rate: $300 Billion annualized [00:10:01]
1. Core Framework: The Macroeconomics of Gold Pricing [00:00:34]
Traditional macro models tracking gold—such as real interest rate correlations or currency models—frequently break down. Citi's data demonstrates that quarterly over the last 15 years, and annually over the last 50 years, gold behavior is best explained by a classic commodity supply-demand balance [00:00:52].
Inelastic Supply: Mine production and scrap supply are structurally finite and show very low volatility [00:01:29].
The Volatility Driver: The clearing price is determined almost entirely by the net dollar capital allocation flows directed into physical gold. When this flow expands, the market must find a marginal stockholder willing to sell. Because existing stockholders typically refuse to liquidate during an up-trend, it produces explosive, convex bull markets [00:01:42].
2. Recent Price Correction & The Iran-Hormuz Geopolitical Context [00:02:12]
Gold recently fell more than 10%, dropping from its all-time high of $5,500 down to around $4,700/oz following the escalation of the Iran conflict [00:02:19].
Max puts this correction into structural perspective:
Historical Context: Despite a 10% pullback, current prices remain at their highest levels relative to the real mining cost of production seen in 50 to 55 years [00:02:55].
Flow De-escalation: Prior to the conflict, global investment demand had driven annualized spending on physical gold from its historical baseline of $300B–$400B all the way to over $1 trillion [00:03:26]. The recent sell-off represents minor profit-taking and momentum exit by retail and short-term traders [00:03:56].
Citi targets a tactical drop to $4,300/oz [00:04:28].
The primary catalyst is a broader "risk-off" liquidation event triggered by higher energy costs. The Iranian regime maintains high structural incentives to keep the Strait of Hormuz closed to maximize deterrence and boost the present value of future oil revenues [00:04:58].
Max draws a direct parallel to March/April 2022 (the Russia-Ukraine energy shock), where commodities initially surged alongside resilient equities, only for a massive, cross-asset risk-off liquidation to hit all markets by May 2022 [00:05:33].
Strategic Outcomes Based on the Strait of Hormuz [00:10:55]
Scenario A: Quick Diplomatic Deal. Risk appetite rebounds immediately. Liquidation fears subside, and gold is projected to reclaim the $5,000+ level rapidly as structural buyers re-enter [00:11:24].
Scenario B: Prolonged Maritime Closure. This scenario leads directly to a stagflationary macro environment. Gold would initially suffer in a broad asset drawdown but would ultimately join oil and agriculture as a core safe-haven asset [00:11:52].
The Policy Pivot Factor: Max highlights that during the late 1970s stagflation shock, gold surged because the Federal Reserve remained behind the curve, keeping real rates low [00:12:22]. However, if the Fed engineers a modern "Volcker moment" by aggressively spiking real interest rates (as Paul Volcker did), gold and broader metals will experience a severe structural sell-off [00:12:50].
The Paper Profit Overhang: At the close of 2023, the total value of above-ground gold stocks stood at roughly $15 trillion. Today, it sits at $32 trillion—representing $17 trillion in paper wealth generated in under 2.5 years [00:07:58]. Central banks hold $3T–$4T of this, while the rest belongs to ultra-high-net-worth (UHNW) individuals, retail, and jewelry holders [00:08:13].
Stock vs. Flow Volatility: Because this total above-ground stockpile ($32T) dwarfs the annual flow market ($1T), even a minor 1–2% portfolio rebalancing or hedging shift by legacy holders introduces severe, Bitcoin-like price volatility [00:07:24]. Currently, UHNW positions remain highly sticky [00:08:20].
Central Bank Activity: Despite major headlines regarding large-scale gold liquidation by Turkey, Citi notes the physical tonnage was quietly absorbed by other sovereign buyers [00:08:43]. Meanwhile, China and Poland continue consistent, structural accumulation, and there are no signs of major producer hedging [00:09:07].
The Sino-Indian Divergence: Two of the world's dominant consumer markets are moving in opposite directions, acting as a net wash on the global price [00:09:41]:
China: Demand is massive. Total gold imports were running at an annualized clip of $300 billion in March 2026, driven by an immense national trade surplus, excess domestic savings, and a lack of alternative local investment options [00:10:01].
India: Demand has sharply contracted. Following domestic tax hikes on gold, a depreciating rupee, and an explicit request from Prime Minister Modi to pull back to protect the national balance of payments, Indian buyers have completely stepped out of the market [00:10:16].
View: Bullish on Cocoa, Sugar, and Robusta Coffee over the next 3–6 months and 12–18 months.
Catalyst: Driven by a developing, severe El Niño weather pattern. Higher oil prices act as a convex macro multiplier, inflating input costs across crop disease protection, fertilizers to maximize yields, harvesting, and transport. Sugar and corn also act as biofuel substitutes for oil [00:16:18].
Action: Citi recently opened a structural bullish trade recommendation for agricultural commodities [00:16:53].
Catalyst: A massive structural supply shock—the largest in the history of its market—has collided with global inventories sitting at 50-year lows. With virtually zero global spare capacity and highly expensive alternative substitutes like copper and plastics, the micro-setup is exceptionally tight [00:17:07].
Jul 18, 2026
The Week Ahead - The World Turns | 17 Jul 2026 | Nomura
1. Executive Briefing TL;DR The Core Thesis: Global central banks are shifting into highly data dependent "wait and see" configurations as cooling structural forces, such as slowing US wage growth and falling wholesale energy costs, clash…