Source: Brokerage China Author: Qu Hongyan Recently, China Yangtze Power hit a historical high and once again showed the slow bull stock trend of "tripling in ten years". The slow bull market has left behind many passers-by and brought good returns to the steadfast investors. It is "rare for those who triple in one year to be like carp jumping over the dragon gate, while those who double in three years are few and far between." On the other end of the investment world, however, violent collapses are also deafening, with many financial products suspected of "Ponzi schemes" ceasing payments, leaving investors with no hope of recovering their investments. Both positive and negative cases illustrate the importance of forming a suitable mentality towards money in one's lifetime; otherwise, sooner or later, you will divorce yourself from your money. "I call this the money mind, a person's IQ can reach 120, 140, or even higher levels, and perhaps some people's minds are good at doing one thing, while others are good at doing another. They can do things that most ordinary people can't do. But I know some very smart people who make very foolish decisions because they lack the money mind." Buffett once said so. The so-called money mind refers to believing in common sense, believing in compound interest, being cautious and rational, thinking independently, prioritizing security over return, not dealing with people with questionable character, not easily guaranteeing for others, not believing in windfall profits, and not trying to cross legal norms for extra benefits. In today's world of ubiquitous information, everyone's wealth may become the "prey" of those with ulterior motives. Only with the money mind, can one form good behavior habits and shield oneself from separating from one's wealth. Do not entrust your wealth easily. Wealth is easy to lose but hard to accumulate, and trust is a vital reason leading to the rapid loss of wealth. "Do not allow anyone else to manage your business unless you can watch their every move closely and understand their behavior; or you have strong reasons to believe in their character and ability. For investors, this criterion determines when you can let someone else make investment decisions for you." Graham's criterion written eighty years ago is so clear. Almost all the investors who lost their wealth in the financial products have violated the above two criteria. They did not have the ability to closely supervise the whereabouts of their funds, nor did they have sufficient reasons to believe in the character of the product issuers. They easily invested their own wealth solely based on others' glib tongue and a piece of commitment paper. They did not act as gatekeepers of their own wealth and ended up with nothing left even if the government punished the wrongdoers. "An ounce of prevention is worth a pound of cure." This is a phrase Munger often says. Destiny must be in one's own hands, and investors with a suitable money mind will try their best to find suspicious points in their investments to protect the safety of their principal. For example, whether the manager is trustworthy, whether the underlying assets are profitable, whether oneself can timely monitor the risks in the investment process, and whether the sales staff is obtaining large commissions. As long as any unreliable signs are found, these investors firmly will not invest their money. Do not desire to get rich quick. As in the capital market and anywhere else, making money is not easy, and desiring to get rich quick will lead to quick loss of wealth. In the capital market, the desire to get rich quickly often leads to investors over-allocating specific stocks, industries, or assets at the worst time. For example, buying high-risk stocks that can gain huge returns once an adventure succeeds, but the chance of success is very small, also known as "whispering stocks" by legendary fund manager Peter Lynch. "They often tell investors a story with explosive effects. These 'whispering stocks' have a hypnotic effect on people, and it is easy for you to believe that the story the company tells has an emotional appeal that can easily confuse you." This is like hearing a very tempting "sizzling" sound, making you salivate, but you did not notice that there is no steak on the grill. In the eyes of investors who lack the money mind, stable yield provided by blue chips such as China Yangtze Power cannot meet their demands. However, historical experience clearly shows that buying stocks lacking in safety solely based on imagined high yields is unwise. The long-term average investment return of general stocks is 9%-10%, which is also the average investment return of stock indexes in history, a benchmark to measure one's investment performance and the benchmark to measure fund investment performance.

On September 20th, the spot gold price broke through $2,600 for the first time, refreshing the historical record. London spot gold surged 1.37% to $2,621.5286 per ounce; COMEX gold futures rose 1.03%, closing at $2,647.1 per ounce.

With the continuous rise in gold prices, domestic gold jewelry prices have also risen sharply. On September 21st, Chow Tai Fook, Lao Feng Xiang and other gold shops set a record price of 767 yuan/gram for gold jewelry.

It is worth noting that last week, long positions in gold futures surged, and the world's largest gold ETF holdings also hit a new high for the year, indicating a bullish sentiment towards gold in the current market. However, physical gold consumption remains weak.

Spot gold broke through $2,600.

Since the beginning of this year, gold has been unstoppable. London spot gold has skyrocketed from the position of $2,000 at the beginning of the year, broke through the $2,500 mark after oscillating and consolidating around $2,400, and surpassed the $2,500 mark in mid-August.

In the early morning of September 19th, the Federal Reserve announced a 50 basis point rate cut in September, bringing the benchmark interest rate to 4.75%-5.00%, officially starting this round of rate cuts. The Fed's launch of an active easing expectation has increased the attractiveness of gold, which does not pay interest.

On September 20, spot gold price broke through $2600 for the first time, refreshing its historical record. At the close, London spot gold rose sharply by 1.37% to $2621.5286 per ounce. COMEX gold futures rose by 1.03%, closing at $2647.1 per ounce.

Since the beginning of this year, London spot gold has risen by 27.12%, surpassing the 25.10% increase in 2020. If this trend continues until the end of the year, it will achieve the largest annual gain in nearly 14 years.

Analysts at Forex.com stated in a report, "Ongoing conflicts in Gaza, Ukraine, and other regions have ensured the safe-haven demand for gold." At the same time, the continuous weakness of the US dollar has made gold cheaper for holders of other currencies, providing additional bullish factors for gold.

Analysts at Deutsche Bank stated in a report that although the Federal Reserve emphasized that a 50 basis point rate cut is an exception rather than the norm, the market seems unconvinced, increasing investor interest in zero-yielding gold. Deutsche Bank said that traders expect a further 75 basis points rate cut by the end of the year, and as long as these expectations persist, the rise in gold prices should continue.

The price of gold trinkets is soaring.

The continuous surge in gold prices has also pushed up the domestic prices of gold trinkets. Data from Jijin shows that on September 21, several gold stores including Chow Tai Fook and Lao Feng Xiang reached a high price of 767 yuan/gram for gold trinkets.

However, the physical gold consumption remains weak. The World Gold Council stated in an article that in August, the gold outflow from the Shanghai Gold Exchange was 102 tons, a 17% month-on-month increase, but a 37% year-on-year decrease. Although the gold outflow achieved a month-on-month increase due to seasonal factors (the upcoming major events in the industry and the peak season of sales in early October), the weakness in gold consumption continues to suppress the upstream demand for physical gold.

In a research report, GF Securities stated that the Mid-Autumn Festival consumption performance was stable. According to feedback from some dealers, the terminal market met expectations but did not show a clear turning point. Some stores have increased discounts, reducing the price per gram by more than 100 yuan. Against the backdrop of continued rise in gold prices, gold trinkets are expected to continue to be favored by consumers.

Is the surge in long positions leading to crowded speculation in gold trading?

Against the backdrop of the continuous new highs in gold prices, many investors continue to be bullish on gold, adding positions to bet on further increases in gold.

According to the data from the Commodity Futures Trading Commission (CFTC) of the United States, during the week of September 17th, speculative net long positions in COMEX gold increased by 0.0259 million contracts to 0.2526 million contracts. This indicates an increased demand for gold as a safe haven amidst growing market uncertainty.

In addition, speculative net long positions in COMEX silver increased by 0.0152 million contracts to 0.0423 million contracts.

Wei Jianrong, an analyst at GF Securities, stated that, according to the CFTC's disclosed open positions for COMEX gold futures, the net long positions held by managed funds engaged in speculative trading have experienced a significant upward trend since October 2023, reaching a high point since 2020. The speculative trading has become crowded.

As of September 13th, 2024, the number of arbitrage position traders in the managed funds category is too low, indicating a crowded market and giving a short signal; the number of long traders is low, and the average position is light, giving both short and long signals in the swap trader category; the COT signal recommends a position of -33.3%.

In a research report, GF Securities pointed out that the Federal Reserve's initial 50 basis point rate cut could be considered a major move, but it also implies a signal of 'rate cuts in the face of recession,' which could have a significant short-term impact on the market. The attempt by gold prices to surge upwards followed by a retreat also indicates that the pressure to realize profits after the 'boom falls' is being released. There is significant pressure for further substantial increases in gold prices in the near term. On the trading front, it is necessary to pay attention to and handle the resistance zone of $2600 - $2650 with caution. However, short-term trading disturbances have not shaken the underlying logic of the current gold bull market, and the long-term driving forces for gradual increases in gold prices remain as dollar substitution and the 'currency anchor.'

It is worth noting that as a significant barometer of the global gold market, the total holdings of the world's largest gold ETF, the SPDR Gold Trust, increased by 1.43 tons compared to the previous day, reaching a total holding of 875.39 tons, marking a new high since January 2nd of this year. The increase in holdings of the SPDR Gold Trust reflects the rising demand for gold in the market.

Although the holdings of SPDR Gold Trust have reached a new high for the year, there is still a significant decrease compared to the peak of 1,270 tons in 2020. The current cumulative net inflow is at a low level since 2020, which also means that there is still a large potential for capital inflow into gold ETFs.

Editor / jayden