Continuing to "race" the Fed's interest rate cut expectations, industry insiders said that the adjustment in gold prices may be a good buying window.
In the December 2023 Fed interest rate meeting, Fed Chairman Powell stated that monetary policy in 2024 will be marginally looser, and the logic of market trading further expects the Fed to cut interest rates. At the same time, precious metal prices, represented by international gold, have continued to rise.
Fed Chairman Powell's "dovish" tone at the U.S. Congress hearing has fueled expectations of a Fed interest rate cut. Powell believes that the Fed does not need to wait for inflation to fall below 2% before cutting interest rates.
Institutional insiders said that a cooling U.S. job market and a decline in inflation levels will trigger preventive interest rate cuts, and the Fed is expected to launch interest rate cuts in September this year.
On July 10th, Schroders stated that the tense geopolitical situation and financial fragility were driving continuous growth in gold demand, which could trigger one of the strongest bull markets in gold since U.S. President Nixon closed the "gold window" in November 1971 and ended the exchange of U.S. dollars for gold. In addition, despite the continuing rise in gold prices, the performance of gold stocks still lags behind that of gold, and it is not excessive to say that gold stocks could rise by 50% as their valuation is still cheap. If it is necessary to include gold stocks in long-term precious metal investment portfolios, the institution believes that now is an appropriate time.
Industry insiders said that the current international gold price increase is mainly driven by expectations of Fed monetary policy.
Although the expected interest rate cut has been repeatedly delayed, the direction of the Fed towards interest rate cuts is certain, and the market will continue to "race" to cut interest rate expectations.
In addition, considering the election, the U.S. government will continue to increase capital expenditures to maintain high economic growth. Historical experience shows that there is a good synchronization between gold prices and the U.S. fiscal deficit, and it is expected that there is still room for gold prices to rise in the future.
Gold-related companies include:
Lingbao Gold (03330), Zijin Mining Group (02899), Shandong Gold (01787), Zhaojin Mining (01818), Chinagoldintl (02099), and others.