September 13, Financial Association News (Reporter Yuqi Wu) Can international gold prices continue to rise after hitting new highs again?

Last night, the gold price set a new historical high in the late trading in New York, reaching $2,560 per ounce, with an increase of nearly $50 during the day. At the close, the price of COMEX gold futures rose by 1.76% to $2,587.2 per ounce.

On the news front, the latest data released by the US Department of Labor showed that the US PPI increased by 1.7% year-on-year in August, and the previous growth rate was revised from 2.2% to 2.1%. In addition, the PPI in August increased by 0.2% month-on-month, exceeding the market's expectation of 0.1%. The core PPI increased by 2.4% year-on-year, up from 2.3% the previous month; it increased by 0.3% month-on-month, also exceeding the expected 0.2%.

In the latest monetary policy decision, the European Central Bank took interest rate cuts measures last night, with the deposit facility rate lowered by 25 basis points, while the main refinancing rate and the marginal lending rate were both significantly reduced by 60 basis points. After this adjustment, the main refinancing rate dropped to 3.65%, the marginal lending rate dropped to 3.90%, and the deposit facility rate dropped to 3.50%.

At the same time, the market is closely watching the upcoming interest rate meeting of the Federal Reserve next week. According to recent reports and analysis, it is highly likely that the Federal Reserve will cut interest rates by 25 basis points at the September meeting, and the total interest rate cuts this year could reach 100 basis points.

Many industry insiders point out that with the Federal Reserve's implementation of a rate cut in September, the market is already speculating whether the Federal Reserve will cut interest rates by 75 basis points or 100 basis points throughout the year. Overall, the market expects the Federal Reserve to become more dovish. In this environment, there is a high probability that the US dollar will fall below the 100 level, and commodities and precious metals are expected to continue to rise.

Gold ETFs have the highest increase today.

The enthusiasm for gold has also spread to the secondary market. As of today's close, the Wind Gold Industry Index rose by 3.17%, SD Gold rose by 2.90%, Chifeng Gold rose by 3.60%, Zijin Mining rose by 3.38%, and Shanjin International, Hunan Gold, Sichuan Gold, and other gold stocks also rose.

In the Hong Kong stock market, as of the close, China Gold International, Zhaojin Mining, and Tongguan Gold rose by 5.46%, 3.64%, and 3.92%, respectively.

Affected by this, the top gainers of ETFs today were dominated by gold-related products. As of the close, the Win-Win CSI Shanghai and Shenzhen Hong Kong Gold Industry Stock ETF rose by 2.54%, the Industrial and Commercial Bank of China CSI Shanghai and Shenzhen Hong Kong Gold Industry Stock ETF rose by 3.19%, the Guotai CSI Shanghai and Shenzhen Hong Kong Gold Industry Stock ETF rose by 2.55%, and the Huaxia CSI Shanghai and Shenzhen Hong Kong Gold Industry Stock ETF rose by 3.22%. Ping An Fund and Huaxia Fund's gold industry stock ETFs rose by 2.47% and 2.70% respectively.

The intra-day gains of other gold-related ETFs and LOFs are all above 1%.(See the figure below)

Looking at a longer time frame, as of September 12th, the year-to-date gain of COMEX gold has reached 24.88%, and the net asset value of some ETFs has also performed well this year, with a total of 19 products having a net asset value gain of more than 10%.(See the figure below)

Among them, the Huatai Fund Gold and Precious Metals A has the highest net asset value growth rate for the year, reaching 20.13%. The E Fund Gold Theme A in RMB has a gain of 20.07%, the Jiashi Gold (QDII- FOF-LOF), E Fund Gold ETF, Guotai Gold ETF, Huaxia Gold ETF, Bosera Gold ETF, Huaxia Gold ETF, Qianhai Kaiyuan Gold ETF, Industrial Bank Gold ETF, and Guotai Gold ETF Link A have all had net asset value growth rates of over 19%.

In the second quarter, many funds held heavyweight positions in gold stocks.

As the price of gold continues to rise, many fund managers have a strong preference for gold stocks and have already taken positions.

In terms of major 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 held as heavyweight positions. Among them, Zijin Mining Group was held by the most funds, with 1165 funds holding a total of 3.163 billion shares. Compared to the end of the previous quarter, public funds overall increased their positions in Zijin Mining Group by a total of 14.8979 million shares.

Among them, Huaxia CSI 300 ETF held the most positions, with 264.3715 million shares. Four CSI 300 Index ETFs, namely, Huatai-PineBridge CSI 300 ETF, E Fund CSI 300 ETF, Jiashi CSI 300 ETF, and Huaxia CSI 300 ETF, held 194.6123 million shares, 129.3937 million shares, 95.2387 million shares, and 91.6475 million shares of Zijin Mining Group, respectively.

In terms of stock price, as of the close on the 13th, Zijin Mining Group has achieved a year-to-date gain of 19.95%.

Shandong Gold is held as a heavyweight position by 238 public funds, with Fu Youxing, a well-known fund manager, holding a significant amount in Guangfa Steady Growth Fund, at 16.601 million shares, and Li Jing, managing Dongfanghong Qidong Three-Year Fund, holding 9.7391 million shares.

The stock price of Shandong Gold has also seen a significant increase of 12.32% year-to-date.

Zhongjin Gold is held as a heavyweight position by 212 products, with Huatai-PineBridge Fuli Fund, Da Cheng New-Economy Fund, Huatai-PineBridge Dingli Fund, ChinaEurope Dividend Advantage Fund, Huatai-PineBridge Multi-Strategy Fund, Invesco Great Wall Shuangying Fund, Da Cheng Ruijing Fund, China Southern CSI SWS Non-Ferrous Metal ETF, Invesco Great Wall Jingyi Shuangli Fund, Yinhe Necessity Selected Fund, and Yinhe Tongli Selected Fund all holding more than 10 million shares.

China Gold's year-to-date stock price has also increased by 29.15%.

In addition, Shanjin International and Chifeng Jilong Gold are heavily held by 178 and 100 funds respectively. The two stocks have performed well this year with gains of 13.00% and 23.63%.

Can the strong gold price continue?

Since the beginning of the year, the gold price has continued to rise, and the strong upward trend has raised questions from investors: how long can this momentum last? Is now the right time to invest in gold?

FXTM's Chief Chinese Market Analyst Yang Aozheng mentioned in a recent interview with Caixin that in terms of gold price, the last interest rate cutting cycle started on July 30-31, 2019. In the month leading up to that date, the price rose from the 1400 level to a high of 1453. In the month after the rate cut, it rose further to a high of 1555. This shows that the volatility of the gold price was very strong both before and after the rate cut. Under the expectation of a weaker US dollar and rate cuts, the gold price has shown a clear upward trend and is believed to have the potential to rise to the $2600 level from its current historical high.

"I believe that gold will have the opportunity to break its historical highs. Gold cycles are generally consistent with rate hike and rate cut cycles."

Interest rate cuts will not only occur in September and December. Yang Aozheng predicts that the Fed's rate cut cycle could continue for the next two years and may last until 2026, when the Fed returns to a neutral interest rate. Coal and gold cycles usually occur earlier than the actual rate cut, as the market anticipates them. Gold may reach its peak at about the halfway point of the rate cut cycle.

Yang Aozheng believes that given his expectation of a two-year rate cut cycle in the future, gold prices are expected to continue to rise in the next year. In fact, market expectations of rate cuts have already been reflected in the past year, driving gold prices gradually higher. This indicates that investors have already positioned themselves ahead of the rate cut expectations. Based on historical data, there is usually about a $100 increase in gold prices after the first rate cut is implemented.

However, whether historical experience will be validated this time is still unknown. After the interest rate cut in September, the gold may not necessarily rise by $100, and it still needs to be judged comprehensively based on multiple factors. However, despite the uncertainty of the gains, historical trends indicate that the upward momentum of gold still exists.

Analysis from Guotai Junan Securities believes that the current weakening of macroeconomic data in the United States has laid the foundation for the Fed to open the interest rate cut window. However, as the period from September to November is the peak season for seasonal demand in the northern hemisphere, it is expected that the Fed's interest rate cut pace still needs to be adjusted based on the performance during the peak season. Under the interest rate framework of gold investment, a new focal point for gold equity may emerge.

Guangda Futures believes that the European Central Bank's further interest rate cut has ignited bullish sentiment, and the market expects that the probability of the Fed's cumulative interest rate cut exceeding 50 basis points by November is increasing. In the short term, gold is expected to run with a bias towards strength. Donghai Futures believes that in the long-term trend, with the enhanced expectation of the Fed's interest rate cut and the global economic uncertainty, gold still has the potential to remain strong over the next few months.