Pacific SecuritiesWeak US dollar superimposed and re-inflated, bullish on gold sector persistence

Analysts at ① Pacific Securities pointed out in the research paper that from the recent market performance, industrial metals and precious metals are rising at the same time, and the logic of demand recovery alone does not explain this problem. Therefore, we continue to emphasize that a weak dollar and a rebound in re-inflationary expectations are the dominant factors. The essence of a weak dollar and re-inflation is ample liquidity. Although the Fed is close to zero interest rates and open unlimited easing, and the room for further monetary easing is limited in the short term, fiscal policy is constantly strengthening expectations of water release during the week.

② analysts pointed out that first, it is reported that a new US stimulus package may be finalized in early August, and that the framework has been basically finalized, including three elements: issuing another round of bailout cheques for the American people, providing loans to American small businesses, and providing $105 billion in aid funds for the resumption of American schools; second, from the European point of view, the European Union is also injecting a lot of liquidity into financial markets through recovery funds.

Analysts at ③ point out that amid the flood of liquidity, the dollar has been falling recently, while inflation has been rising. We have been bearish on the dollar within the framework of the large cycle since the end of last year. The expected inflation rate implied in the real yield of 10-year US Treasuries has reached 1.51%, driving the real yield down to an all-time low of-0.92%. From the trend, there is still plenty of room for the dollar to fall and inflation to rise. We maintain the previous point of view, the liquidity market will also have greater sustainability, bullish on gold, copper and other commodities investment opportunities