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.

Author: Chang Liu

The gold price spread between futures and spot prices is at a high level.

On September 23, after hitting a historical high, the international gold price suddenly fell sharply. As of the time of reporting, the London spot gold price was near $2,616 per ounce, the New York Comex gold futures December contract price was close to $2,641 per ounce, and the spread between London spot gold and Comex gold front-month contracts, that is, the price difference between futures and spot prices (Spread), reached as high as $25 per ounce.

The spread between futures and spot prices is an important indicator of investment enthusiasm. At the end of July this year, this spread once approached $50 per ounce, reaching a new high since March 2020. Now this spread has still not closed, and the net long positions in the gold market continue to rise.

Previously, in March 2020, physical gold bars were in short supply due to the impact of the epidemic, leading to a round of "gold spot squeeze" market where the futures and spot price spread reached as high as $75 per ounce, and gold shorts sharply cut positions. It was only after the exchanges accepted remote settlements that things returned to normal.

Compared to the special situation of the global pandemic in March 2020, the current international gold market has similarly strong investment demand and low gold output. The Commodity Futures Trading Commission (CFTC) trading positions report (COT) shows that as of the week of September 17, Comex gold net long positions increased by 0.0259 million contracts to 0.2526 million contracts. Among them, the net long positions of managed funds reached 0.24 million contracts, an increase of 0.028 million contracts. The net long positions of managed funds representing market speculative demand have reached highs since 2020. Short positions, represented by producers such as mines, have continued to hover around 0.09 million contracts and have only increased by 0.01 million contracts in the past three months.

Gold ETFs are favored by funds again.

Since the second half of the year, funds seem to be favoring gold ETFs again. Global gold ETF products recorded net inflows of $2.1 billion in August, coupled with the rise in gold prices, the overall size of global gold ETFs reached a new high at the end of August, reaching $257 billion.

Currently, the giant gold ETF with a size close to $70 billion $SPDR Gold ETF (GLD.US)$ has received net fund inflows for three consecutive months. Especially in August, the amount of gold held by global gold ETF products increased by 28.5 tons in August, with North American funds increasing their holdings by 17.2 tons of gold.

In the spot market, India's gold imports hit a record high in August, reaching $10.06 billion. According to consultancy firm Metals Focus' preliminary estimate, India's gold imports in August were around 131 tons, the 6th highest import volume ever. In addition to ordinary consumers, the Reserve Bank of India has been actively increasing gold reserves, with reserves increasing by 42 tons of gold in the first seven months of this year, more than twice the annual purchase volume in 2023.

Citigroup's latest report reaffirmed its bullish view on gold. Citigroup stated that there has been a significant rebound in gold ETF inflows, coupled with strong central bank demand, which should continue to drive gold prices higher in the medium term.

Compared to the international market, the domestic gold ETF market has experienced some differentiation, with significant variations in different types of gold products. Among them, gold products tracking the spot gold price of the Shanghai Gold Exchange have all seen over 20% increases. The largest in size $HUANGJINETF (518880.SH)$ However, the fund shares have dropped continuously from the high point of 4.79 billion shares in early August to 4.1 billion shares. Other scale-type products also experienced a decrease in shares.

and tracking the CSI gold industry stocks in Shanghai and Shenzhen markets$ChinaAMC CSI SH-SZ-HK Gold Industry Equity ETF (159562.SZ)$products, after a sharp decline post-July, started a rising trend, leading the rebound in the sector. Among them, the highly watched market $ChinaAMC CSI SH-SZ-HK Gold Industry Equity ETF (159562.SZ)$ Since reaching this year's price peak on July 17, it has shown a continuous downward trend. As of September 9 before the rate cut, the cumulative decline exceeded 25%, resulting in a situation where stock prices fell ahead of the rate cut. However, after the rate cut, the cumulative increase was nearly 10%, and the fund shares continued to stabilize at a high level.

Analyst Yan Rong from Huaxi Securities believes that the reason for the early decline before the rate cut was in response to the anticipation of a rate cut causing a drop in gold prices among domestic investors. The performance of gold prices since the rate cut on September 18, and the implied logic supporting the continuous high gold prices. The significant discrepancy in performance between gold prices post-rate cut and the early decline in gold stock prices indicates a valuation correction is expected to drive stock price recovery.

Precious metals are still worth allocating.

Currently, investment banks such as UBS and Goldman Sachs have set a target price of $2,700, and more domestic and foreign hedge funds expect that breaking through the $3,000 mark is only a matter of time.

Zhao Jiayu, an analyst at CMB Futures, believes that from the perspective of general asset allocation, precious metals are still worth being more allocated in order to hedge the risks of currency credit. The price of gold maintains a step-by-step upward trend, and the transition from oscillation to rapid upward movement requires event-driven factors. It is still recommended to increase allocation on dips.

Zhao Jiayu stated that the anchor of precious metals at present is not the actual interest rates under the global quantitative easing system, but the currency credit risks that the global quantitative easing system can no longer sustain. Therefore, the fundamental driver of the rise remains unchanged. From past experience, interest rate cuts often favor precious metals, but the impact on other varieties still needs further observation.

Li Bin from Huatai Securities stated that in reviewing the interest rate cut cycles since 1980, it can be observed that the price of gold is highly likely to continue rising in the early stages of an interest rate cut cycle, while the longer-term trend of gold prices depends on the economic environment at that time. The valuation level of domestic golden industrial concepts is currently much lower than the historical levels in the same period. With the Fed starting an interest rate cut cycle, the domestic policy space is expected to open up synchronously, and market risk appetite may gradually improve. The combination of 'undervaluation' and 'improving market risk appetite' highlights the continued outstanding cost-effectiveness of domestic golden industrial concepts.

Editor/Rocky