Under the influence of factors such as the continued rise in gold prices and increasing trading activity, institutions have raised their gold price forecasts for this year, and the A-share precious metals sector has also "danced" accordingly, with a cumulative increase of nearly 10% since April. Industry insiders believe that the Fed’s current round of interest rate hikes is coming to an end, and the price of gold is expected to enter a bull market, which will boost the precious metals sector, including gold, to obtain excess returns.
Since April, the spot gold price once soared to US$2,032 per ounce, setting a new high in nearly 11 months. Although it has fallen back recently, it still stands firm at the $2,000/oz mark.
At the same time, the gold market and related transactions continued to be hot. According to data from the World Gold Council, in March, the average daily global gold trading volume was US$183 billion, a surge of 25% from the previous month, the highest level in a year, and 39% higher than the average daily trading volume of US$132 billion in 2022. In addition, the average daily trading volume of the physical gold market in March increased by 7% from the previous month, while the trading volume of gold derivatives on exchanges and gold ETFs soared by 57% and 51%, respectively.
Institutions have raised their forecasts on gold prices. Citigroup estimates that gold prices will reach $2,300 an ounce in the short term. Citigroup believes that gold has gained a foothold since the beginning of the year, with an average price so far of about $1,895 an ounce, and that the rise in gold prices is due to a weakening of the strong dollar and a slight weakening in inflation as oil prices retreat from their highs.
Dutch bank ING estimates that the average price of gold could remain at $2,000 an ounce in the fourth quarter of this year due to increased exposure to speculators and interest rate cuts by the Federal Reserve. "After the surge in the past three months, a pullback in gold prices is inevitable, but there is still a lot of room for growth in the second half of this year." said the head of commodity strategy at Dutch bank ING.
With the fall of U.S. inflation and the current anti-globalization background, the purchase demand for gold reserves is rising systematically. The price of gold has entered the upward channel on the right and is expected to reach US$2,300/oz to US$2,500/oz or even above.
Affected by this, the A-share precious metals sector rose strongly. As of yesterday's close, Shenwan's secondary occupational precious metals sector rose by 4.16%, of which Sichuan Gold rose by 7.22% and Shandong Gold rose by 5.46%. Since April, the cumulative increase of the entire precious metals sector has been close to 10%.
Judging from the published 2022 annual reports of relevant listed companies, the performance of gold professional listed companies has shown a significant improvement.
The financial report shows that Shandong Gold will achieve operating income of 50.306 billion yuan in 2022, a year-on-year increase of 48.24%; the net profit attributable to shareholders of listed companies will be 1.246 billion yuan, turning losses into profits year-on-year. In 2022, the company's mine gold output will be 38.673 tons, a year-on-year increase of 13.892 tons, an increase of 56.06%.
According to Sichuan Gold, the company will achieve operating income of 472 million yuan in 2022, a year-on-year decrease of 10.16%; the net profit attributable to shareholders of listed companies will be 199 million yuan, a year-on-year increase of 29.53%. From the perspective of business structure, "gold concentrate" is the main source of the company's operating income, accounting for 100% of revenue and 51.31% of gross profit.
Regarding the future trend of the precious metals sector, brokerages generally hold a bullish view.
Now that the time for the Fed to end this cycle of interest rate hikes is approaching, the market’s expectations for interest rate cuts are heating up, which may open up a new cycle of gold price increases. Judging from historical data, from the end of interest rate hike to the opening of the next round of interest rate cut cycle, most of the time during this process, the yield of gold has shown a significant improvement. Therefore, as the price of gold enters a bull market, it will bring significant excess returns to the gold sector.