Author: Zhou Aileen
The international gold spot price broke through a record high, exceeding US$2,180 per ounce on Monday, but everything may have just begun. Many institutions have called out a target of US$2,200 as early as last year.
Since last year, the increase in domestic RMB-denominated gold has been higher than the international gold price, while the price of gold jewelry in major domestic gold brand gold stores has been even higher, almost exceeding the 660 yuan/gram mark.
Although the rise in gold prices is impressive, the trend of gold concept stocks is more complicated.
According to statistics from Databao, there are currently at least 24 companies involved in gold mining, gold smelting and processing, and gold jewelry production in the A-share market.
As of March 11, 24 companies have fallen by an average of more than 5% during the year. Six stocks, including CICC Gold, Hunan Gold, and Tongling Nonferrous Metals, have increased by more than 10%. Among them, CICC Gold ranks first, with an increase of more than 16%. The company is currently one of the top ten domestic companies. One of the largest gold mine development companies.
Gold prices continue to rise
The interest rate market's bets on the Federal Reserve's interest rate cuts increased slightly, and the U.S. bond yields continued to fall, dragging down the U.S. dollar index. Gold took advantage of the victory and recorded eight consecutive daily positives. It hit a record high of $2,195 in intraday trading last Friday, with a cumulative gain of 4.62% for the week. Silver rose 5.2%.
"After hitting new highs in a row, gold prices are currently 11% above the 200-day moving average. Although there is a certain degree of overbought, the degree of deviation is still not extreme. When gold prices reached stage highs in 2011 and 2020, the degree of deviation was close to 30% and 26%, which are also about 13% higher than the moving average at the high points in 2022 and 2023. With the current strong upward momentum coupled with rising interest rate cut expectations and vague hedging demand, the gold price may still have some gains before the mean returns. It is possible to continue to (finally) rise higher." Jerry Chen, a senior analyst at Jiaqiang Group, told reporters.
But he also said that the accumulating short-term correction risk cannot be ignored.
Below, focus on positions such as $2,150 and $2,120 and short-term moving averages.
From a longer-term perspective, $2,080 is obviously an important support.
Gold's one-week implied volatility rose to the highest level in nearly a year, 17.34%, which means that the potential fluctuation range of gold prices this week is 2125.26~2232.12 US dollars.
Currently, the gold target price of most international investment banks is still around US$2,200, but the possibility of further increases is not ruled out.
Speculative demand, the need to avoid geopolitical risks, and the buying demand of global central banks are all increasing, coupled with the continued weakening of the U.S. dollar, these factors are driving gold to continue to heat up.
Juan Carlos Artigas, head of research at the World Gold Council, mentioned in an exclusive interview with China Business News that more than 70% of central banks surveyed last year expected global gold reserves to increase in the next 12 months.
Emerging markets are more likely to increase their gold reserves than developed markets because their gold reserves are already at relatively high levels.
Interest rate levels, inflation concerns, geopolitical risks, ESG issues, changes in the global economic landscape and other factors are all key issues that central banks consider first when allocating gold.
Data also shows that central banks in various economies continue to purchase gold on a large scale.
Net gold purchases for the year were 1,037 tons, only 45 tons less than the historical record in 2022.
China’s central bank, whose gold reserves have been fairly stable for years, has recently been increasing its holdings of the asset.
Data released by the People's Bank of China on March 7 showed that China's gold reserves at the end of February were 72.58 million ounces, compared with 72.19 million ounces at the end of January.
Since November 2022, the People's Bank of China has started this round of increase in gold reserve holdings, and by February it had increased its holdings for 16 consecutive months.
Domestic gold jewelery prices are rising
In contrast, the prices quoted by domestic gold stores have been rising. The price per gram has climbed from less than 620 yuan before the Spring Festival to nearly 670 yuan this week. Gold jewelry also needs to charge considerable additional labor fees.
On March 11, according to the reporter’s statistics from the Gold Price Inquiry Network, the gold prices of several well-known gold stores were: Chow Tai Fook 666 yuan/g, Chow Sang Sang 667 yuan/g, Luk Fook Jewelry 666 yuan/g, Xie Ruilin 665 yuan/g, Chao Acer 666 yuan/gram, Laomiao gold 662 yuan/gram.
Despite the 17% surge in domestic gold prices, total demand for gold jewelry in China still reached 630 tons, a year-on-year increase of 10%.
This is mainly due to the recovery of China's economy, the increasing appeal of gold to consumers seeking value preservation, and the growing demand for wedding gold jewelry.
The World Gold Council told China Business News that gold prices have shown strength, while other RMB assets have performed relatively weakly. The People's Bank of China has successively announced gold purchases. Against this background, gold has become increasingly popular, supporting the strong sales of gold bars and gold coins.
However, the downside risk to gold prices is that people think that 2024 is not a good time to get married, which may also have a potential impact on the demand for wedding gold jewelry.
In addition, although the traditional sales season before the Spring Festival holiday in 2024 may lead to strong gold jewelry demand in the first quarter, high gold prices and potential slowdown in economic growth thereafter may put pressure on China's gold jewelry consumption.
For example, in 2023, gold jewelry with small weight and low total price will be more popular than other products.
Data shows that products weighing less than 10 grams and priced less than 2,000 yuan contribute the most to the sales of gold jewelry retailers, which may also reflect the impact of gold prices on the demand for gold jewelry.
Gold concept stocks attract attention
The popularity of gold concept stocks has increased significantly recently. This is not only related to the rise in gold prices, but also because A-shares are beginning to show signs of stabilization.
On March 7, gold stocks strengthened across the board. As of the close, the sector index surged by 2.55%, hitting a new high since the rebound. Sichuan gold reached its daily limit during the session, and many stocks such as Yintai Gold, Zijin Mining, Lao Fengxiang, and Jincheng Cheng hit record highs. .
Gold-related ETF funds also surged across the board on March 11, and the top 10 funds with the highest increase were all related to gold.
Shanghai Gold ETF, Gold ETFAU, Nonferrous Mining ETF, Huaan Gold ETF, etc. all hit record highs in volume.
According to statistics, there are currently at least more than 20 companies involved in gold mining, gold smelting and processing, and gold jewelry production in the A-share market.
However, as of March 8, 2024, the above-mentioned companies have fallen by more than 5% on average during the year, with CICC Gold leading the way, with a gain of nearly 18%.
The difference is also closely related to the different proportion of the gold mining business in the company's overall revenue, and market sentiment also has a greater impact.
From the perspective of institutions, once the rising trend of gold prices is established, the biggest beneficiaries will naturally be gold mining companies with large gold reserves, high enough production, low enough costs, and high gold content in assets and revenue.
In terms of reserves, ranking first is Zijin Mining, which has the largest market value and is controlled by the Finance Bureau of Shanghang County, Fujian.
According to data from the Ministry of Natural Resources, as of 2021, Zijin Mining's gold mine resources are 2,372.90 tons and gold reserves are 792.15 tons, accounting for 41.1% of the total domestic gold reserves.
Ranking second in reserves is Shandong Gold, which is controlled by Shandong State-owned Assets. It has more than 2,100 tons of domestic gold resources and proven gold reserves of 592.41 tons, accounting for nearly 30% of domestic gold reserves; CICC ranks second in gold reserves. The third place has gold resources of about 550 tons, mainly concentrated in China. There is still a big gap compared with Zijin Mining and Shandong Gold.
In terms of gold production, Zijin Mining is still far ahead among gold mining companies.
The company's annual mined gold output in 2022 is 56.4 tons, equivalent to about 15% of the domestic total; followed by Shandong Gold, with a gold output expected to be about 40 tons in 2022; CICC Gold's mined gold output in 2021 is 20 tons.
In terms of total market value, the current gold concept stocks are Zijin Mining, Luoyang Molybdenum, Shandong Gold, TBEA, Jiangxi Copper, and CICC Gold; in terms of net profit, they are: Zijin Mining, Tebian Electrical substation, Jiangxi Copper, Tongling Nonferrous Metals, Luoyang Molybdenum, Yuyuan Co., Ltd.
Data shows that seven companies including Yintai Gold, CICC Gold, Chifeng Gold, Shandong Gold, Baiyin Non-ferrous Metals, Sichuan Gold, and Jingui Silver will receive additional foreign investment in 2024. They are mainly gold mining and gold smelting concept stocks.
Among them, Chifeng Gold ranks first in terms of increased positions, with Beishang Capital’s latest holding of 3.23%, 1.79 percentage points higher than the increase in positions at the end of 2023. The company is mainly engaged in gold mining and comprehensive resource recycling business. Although its stock price has rebounded sharply in recent weeks, it has Throughout the year, it is still on a slight downward trend.
Some institutions predict that there are only three companies whose net profits are expected to continue to grow in 2024 and 2025, including Chifeng Gold, CICC Gold and Shandong Gold. Among them, Shandong Gold’s net profit growth limit in 2023 will reach 100.66%. Net profit growth is expected to continue to exceed 30%.