Gold futures prices are just one step away from all-time highs, how much upside is there?

Gold prices climbed further.

On May 5, the main contract of COMEX gold futures hit a maximum of $4,2085.4 / oz, just one step away from the all-time high of $2089,<> / oz. As the price of gold rose sharply, so did gold stocks.

CITIC Securities said that it expects the U.S. bond interest rate and the dollar index to be volatile and weak, and gold still has upside, but it is necessary to be wary of the disturbance caused by the revision of interest rate cut expectations.

Gold stocks soared

In the early morning of May 5, Beijing time, the Federal Reserve announced a 4 basis point interest rate hike, raising the target range of the federal funds rate to 25% to 5.5%. Fed Chairman Jerome Powell said that in principle, there is no need to raise interest rates to too high a level, and it is approaching the pause of interest rate hikes, but the Fed has not yet made a clear decision on whether to stop raising interest rates.

Gold prices soared. The main contract of COMEX gold futures hit as high as $2085,4.2089 / oz, just one step away from the all-time high of $<>,<> / oz.

With the sharp rise in the price of gold, gold stocks soared again on May 5.

Wind data shows that the Wande Gold Industry Index, which contains 10 constituents, all rose today. Sichuan Gold (001337.SZ) rose 3.6%, up more than 8% intraday; CICC Gold (600489.SH) rose 4.19%, while Shandong Gold (600547.SH) and Hengbang (002237.SZ) also rose more than 3%. Hong Kong stock Zhaojin Mining (01818.HK) rose 2.42%, Shandong Gold (01787.HK) rose 5.56%, and China Gold International (02099.HK) 7.82%.

The performance also provided strong support for the strength of gold stocks, and a number of gold companies performed well in the first quarter of this year.

For example, Sichuan Gold's revenue in the first quarter of this year was 1 million yuan, a year-on-year increase of more than 78%, and its net profit was 6185.59 million yuan, a year-on-year increase of nearly <>%.

Shandong Gold achieved revenue of 130.98 billion yuan, down 2.84% year-on-year, net profit attributable to the parent of 4 million yuan, a year-on-year increase of about 39%, CICC Gold's revenue was 133.47 billion yuan, a year-on-year decrease of 2.07%, and the net profit attributable to the parent was 5 million yuan, a year-on-year increase of about 95%.

Multiple factors drove gold prices to new highs

So, what about the follow-up action of gold prices?

Xia Yingying, research director of nonferrous industrial products at the South China Research Institute, told The Paper that there are four main driving factors for gold's sharp rise.

First of all, the amateur shock of Bank of America, the rise of risk aversion amid risk concerns, and the risk of the banking sector may further tighten credit and increase recession pressure, which is conducive to safe-haven demand for precious metals. Xia Yingying said that fragile market confidence has made safe-haven assets such as gold more popular with investors.

Secondly, from the perspective of economic data, Xia Yingying mentioned that the US employment data fell more than expected, reflecting the cooling of corporate labor demand, the further slowdown of the economy, easing the pressure on hourly wages and inflation in the United States, and raising the Fed's expectation of cutting interest rates this year. In addition, the risk of default on sovereign debt of the US government has increased, and the decline in US dollar credit is negative for the US dollar and positive for the long-term trend of precious metals.

In addition, the Fed's interest rate meeting in the early hours of Thursday morning released a dovish signal, stimulating precious metals to rush higher. After the Fed's interest rate decision, the market expected that the Fed interest rate had peaked and raised the number of rate cuts expected to four during the year. Xia Yingying said.

Guotai Junan Futures gold researcher Liu Yuxuan also believes that the Fed meeting is basically in line with expectations, and revealed a signal that the interest rate hike cycle may end, in addition to the changes in the statement, Powell also mentioned this at the press conference, as long as the interest rate is at a sufficiently restrictive level, there is no need to raise the interest rate to a too high level, the overall sentiment is dovish.

"After the meeting, the dollar fell, interest rates fell, gold and silver performed strongly, but in terms of time-sharing performance, gold and silver concentrated upward coincided with a sharp decline in the share price of Westpac United Bank in the United States, which may suffer huge losses due to writing down some of its loans, resulting in almost no one willing to buy the bank as a whole, so the stock price fell sharply. Rather than rising because the Fed is about to end its rate hikes, we believe the gold and silver rally is more due to the safe-haven stimulus that began with the emergence of a new banking vortex center. Liu Yuxuan told the surging news reporter.

Gold prices are expected to rise further

Looking ahead, institutions generally believe that gold prices are expected to rise further.

West China Securities pointed out that in the short and medium term, the Bank of America crisis fears have revived, the current signs of economic slowdown have become clearer, higher interest rates will further increase the risk of recession, and the current interest rate hike may come to an end. From a longer-term perspective, the focus on "de-dollarization" has increased, and the value of gold has become more prominent in the process. From the perspective of gold price framework, "credit hedging + inflation resilience" dominates the general direction of gold prices, and gold prices still have a long-term price upward foundation; In terms of medium-term driving factors, the end of interest rate hikes has weakened the suppression of gold's financial attributes, and under the general trend, gold prices still have upward flexibility, and it is recommended to pay attention to gold investment opportunities.

In Liu Yuxuan's view, gold and silver buying is difficult to be easily broken - as long as all kinds of economic data continue to weaken, the end of trading interest rate hikes - the economy runs towards recession - the big logic of the opening of the interest rate cut cycle will continue to drive gold and silver to perform strongly, new highs can be expected, and some risk points, such as further rise in terminal interest rates, may only delay the pace of precious metals rising.

Liu Yuxuan said: "However, if the risks from the banking sector continue to ferment more than expected, then the chance of a volatile correction after the end of the May interest rate hike that we had expected may gradually narrow, and gold will remain prone to rise and fall." ”

CICC also believes that gold is expected to achieve higher gains in 2023. As inflation in the United States falls, it will drive the Fed to slow down the pace of interest rate hikes or even start the interest rate reduction cycle, and real interest rates are expected to continue to fall; Coupled with the current anti-globalization background, the global monetary system is facing profound changes, the purchase demand for gold reserves is systematically rising, gold prices have entered the right upward channel, is expected to hit a record high, even reaching the level of 2300-2500 US dollars / ounce.

"Gold remains bullish in the long term, and gold valuations are expected to continue to move upwards as the Fed's interest rate hike nears its end and monetary policy shifts marginally to loosen. At the same time, the central bank buying boom will also continue to boost gold demand. In addition, the risk of recession in the United States and geopolitical risks will also push up safe-haven demand for gold. Xia Yingying said.

You still need to be alert to the risks

After a series of sharp gains, the risk of correction in gold prices is also gathering.

CITIC Securities expects U.S. Treasury rates and the U.S. dollar index to be volatile, and gold still has room to rise, but it needs to be wary of the disturbance caused by the revision of interest rate cut expectations.

Jerry Chen, a senior analyst at GAIN Capital Group, also believes that the next step for gold bulls is obviously to completely break through the top structure of $2020-2070 / oz formed since 2080 and push gold prices higher. But before that, because gold prices triggered profit-taking after rushing up to new all-time highs, they may first retrace to the $2050,<> / oz line to adjust.

Xia Yingying reminded that at the current high, it is not recommended that investors continue to chase the rise at a high level, and can wait for the gold price to pull back before investing step by step.

"In the short term, after the Fed interest rate meeting, the market's optimistic expectations for the Fed's interest rate cut pushed U.S. gold and silver near the previous high key resistance level. However, market optimism still needs to be verified and supported by Friday's heavy non-farm payrolls report and May 5 US CPI data, if the data still shows strong economic employment or high inflation, precious metals may face some pullback pressure after already rising to key resistance levels. Xia Yingying said.