Can the international gold price continue to reach a new high?
Last night, the price of gold hit a historic high again in late trading in New York, reaching $2560 per ounce, with a intraday increase of nearly $50. As of the close, COMEX gold futures prices rose 1.76% to close at $2587.2 per ounce.
On the news front, the latest data released by the US Department of Labor shows that the PPI in August increased by 1.7% year-on-year, while the previous growth rate was revised from 2.2% to 2.1%. In addition, PPI increased by 0.2% month on month in August, exceeding market expectations of 0.1%. The core PPI increased by 2.4% year-on-year, up from 2.3% in the previous month; The month on month growth of 0.3% also exceeded the expected 0.2%.
In the latest monetary policy decision, the European Central Bank took interest rate cuts last night, with the deposit facility rate dropping by 25 basis points, while the main refinancing rate and marginal lending rate were significantly reduced by 60 basis points each. After this adjustment, the main refinancing rate has been reduced to 3.65%, the marginal lending rate has been reduced to 3.90%, and the deposit mechanism rate has been reduced to 3.50%.
Meanwhile, the market is closely monitoring the Federal Reserve's upcoming interest rate meeting next week. According to recent reports and analysis, the Federal Reserve is highly likely to cut interest rates by 25 basis points at its September meeting, and the overall rate cut this year could reach 100 basis points.
Many industry insiders have pointed out that due to the basic implementation of the Fed's September interest rate cut, the market is currently speculating whether the Fed will cut by 75 basis points or 100 basis points throughout the year. Overall, the market expects the Fed to become increasingly dovish. In this environment, the probability of the US dollar falling below the 100 basis point mark is very high, and commodities and precious metals are expected to continue to rise.
Gold ETF leads gains today
The rise in gold prices has also spread to the secondary market. As of today's close, the Wande Gold Industry Index has risen by 3.17%, Shandong Gold has risen by 2.90%, Chifeng Gold has risen by 3.60%, Zijin Mining has risen by 3.38%, and several gold stocks such as Shanjin International, Hunan Gold, and Sichuan Gold have risen.
On the Hong Kong stock market, as of the close, China Gold International, Zhaojin Mining Industry, and Tongguan Gold rose by 5.46%, 3.64%, and 3.92% respectively.
As a result, today's ETF growth chart was dominated by gold related products. As of the close, the Yongying CSI Shanghai Shenzhen Hong Kong Gold Industry Stock ETF rose 2.54%, the ICBC CSI Shanghai Shenzhen Hong Kong Gold Industry Stock ETF rose 3.19%, the Guotai CSI Shanghai Shenzhen Hong Kong Gold Industry Stock ETF rose 2.55%, the Hua'an CSI Shanghai Shenzhen Hong Kong Gold Industry Stock ETF rose 3.22%, and the gold industry stock ETFs under Ping An Fund and Huaxia Fund rose 2.47% and 2.70% respectively.
The intraday gains of other gold related ETFs and LOFs are all above 1%. (As shown in the figure below)
Looking at the timeline, as of September 12th, COMEX Gold has seen a year-on-year increase of 24.88%, and some ETFs have also shown impressive net asset value gains this year, with a total of 19 products experiencing a net asset value increase of over 10%. (As shown in the figure below)
Among them, Huitianfu Gold and Precious Metals A had the highest net asset value growth within the year, reaching 20.13%. E Fund Gold Theme A saw a RMB increase of 20.07%, while Jia Shi Gold (QDII FOF-LOF), E Fund Gold ETF, Guotai Gold ETF, Hua'an Gold ETF, Boshi Gold ETF, Huaxia Gold ETF, Qianhai Kaiyuan Gold ETF, ICBC Gold ETF, and Guotai Gold ETF Connect A all had net asset value growth rates exceeding 19%.
Multiple funds heavily invested in gold stocks in the second quarter
The continuous rise in gold prices has led many fund managers to favor gold stocks and have long been lurking among them.
From the perspective of heavy holdings, public funds also held a large number of gold stocks in the second quarter. As of the end of the second quarter, a total of 13 gold stocks were heavily held. Among them, Zijin Mining is held the most, with 1165 funds held and a total of 3.163 billion shares held. Compared to the end of the previous quarter, the overall holdings of Zijin Mining by public funds amounted to 14.8979 million shares.
Among them, the Huaxia SSE 50 ETF has the largest holdings, with 264.3715 million shares. The four CSI 300 index ETFs - Huatai Bairui CSI 300 ETF, E-Fund CSI 300 ETF, Jiashi CSI 300 ETF, and Huaxia CSI 300 ETF - respectively hold 194.6123 million shares, 129.3937 million shares, 95.2387 million shares, and 91.6475 million shares of Zijin Mining.
In terms of stock price, as of the close on the 13th, Zijin Mining has seen a year-on-year increase of 19.95%.
Shandong Gold is heavily held by 238 public funds, with well-known fund manager Fu Youxing managing Guangfa Steady Growth holding a significant amount of 16.601 million shares, and Li Jing managing Dongfanghong Qidong holding 9.7391 million shares over the past three years.
The stock price of Shandong Gold has also risen significantly this year, reaching 12.32%.
Zhongjin Gold is heavily held by 212 products, including Huatai Bairui Fuli, Dacheng New Industry, Huatai Bairui Dingli, Zhongou Dividend Enjoyment, Huatai Bairui Multi Strategy, Wanjia Dual Engine, Dacheng Ruijing, Southern Zhongzheng Shenwan Nonferrous Metals ETF, Jingshun Changcheng Jingyi Shuangli, Yinhua Domestic Demand Selection, Yinhua Tongli Selection, etc., all of which hold over 10 million shares.
The cumulative increase in the stock price of CICC Gold within the year has also reached 29.15%.
In addition, Shanjin International and Chifeng Gold are heavily held by 178 and 100 funds respectively, and their stocks have also seen good gains this year, with 13.00% and 23.63% respectively.
Can the strong gold price continue?
Since the beginning of the year, gold prices have continued to rise, and the strong upward trend has raised investors' questions: how long can this momentum continue? Is now the appropriate time to lay out gold?
Yang Aozheng, Chief Chinese Market Analyst at FXTM, recently mentioned in an interview with Caixin that in terms of gold prices, the last interest rate cut cycle started on July 30-31, 2019. In the month before that date, it rose from the 1400 level to the highest level of 1453, and further rose to the highest level of 1555 in the month after the interest rate cut. This reflects that the volatility of gold prices before and after the interest rate cut is very strong. With the weakening of the US dollar, the trend of gold prices is obvious under the expectation of interest rate cuts. At the current historical high point, it is believed that gold prices are still expected to rise further to the $2600 level.
I believe there is still a chance for gold to break historical highs, and this cycle of gold is basically consistent with the cycles of interest rate hikes and cuts
Interest rate cuts will not only occur in September and December. Yang Aozheng predicts that the Fed's interest rate cut cycle may continue for the next two years, possibly until 2026, when the Fed will return to neutral rates. The cycles of coal and gold usually appear earlier than the actual time nodes of interest rate cuts, because the market expects it in advance, and gold may reach its peak around halfway through the interest rate cut cycle.
Yang Aozheng stated that given his expectation that the future interest rate cut cycle will last for two years, gold prices are expected to continue to rise in the next year. In fact, the market's expectation of interest rate cuts has been reflected in the past year, driving the gradual rise of gold prices, indicating that investors have already laid out their interest rate cut expectations in advance. According to historical data, usually after the first interest rate cut is implemented, there is still about $100 of upward space for gold prices.
However, it is still unknown whether historical experience will be validated again this time, and whether gold will definitely rise by $100 after the September interest rate cut still needs to be judged comprehensively based on multiple factors. However, despite the uncertainty of the increase, historical trends indicate that the upward momentum of gold still exists.
According to a research report by Open Source Securities, the current weak macroeconomic data in the United States lays the foundation for the Federal Reserve to open a window for interest rate cuts. However, as September to November is the peak season for seasonal demand in the northern hemisphere, it is expected that the pace of the Federal Reserve's interest rate cuts will still need to be adjusted based on the performance of the peak season. Under the interest rate framework of gold investment, a new hitting point for gold equity may emerge.
Everbright Futures believes that the European Central Bank's further interest rate cuts have ignited bullish sentiment, and the market expects the probability of the Federal Reserve's cumulative interest rate cuts exceeding 50 basis points by November to increase. In the short term, gold is being treated as a strong asset. Donghai Futures believes that in the long run, with the increasing expectation of Fed interest rate cuts and global economic uncertainty, gold is still expected to maintain its strength in the coming months.