The Zhitong Finance App learned that Caitong Securities released a research report saying that due to the rise in oil prices after the US-Iran conflict, the market's operating expectations for the Federal Reserve changed from interest rate cuts to interest rate hikes, which directly led to the return of gold's “lost 2022.” However, looking backwards, short-term momentum has gradually turned to the right. In the medium term, the probability that the Fed's interest rate decision will remain unchanged during the year, and the possibility that the US dollar will systematically break through the high level before is being reduced; in the long run, the more concerns about geopolitical stability and sovereign debt sustainability issues, the more attention needs to be paid to the monetary and credit replacement value of gold. This is also the underlying logic of the central bank's gold purchases. The bank believes that London Gold is currently at 4,900 US dollars/ounce in the third quarter and 6,000 US dollars/ounce in the medium term. Currently, it is still in the bottom range, so it can be actively deployed from a configuration perspective.
The main views of Caitong Securities are as follows:
Long-term logic: sovereign credit revaluation pushes central banks to continue to buy funds
Gold has no cash flow or sovereign endorsement, so there is no counterparty risk. When finance, money, and geography themselves become sources of risk, the “no-debt attribute” changes from shortcomings to scarce values. First, global government leverage is easy to rise and difficult to reduce. The US problem is particularly prominent. Fiscal expansion → increase in treasury bond supply → increase in term premiums and interest burdens → monetary authorities' financial stability restrictions have increased, and gold has replaced part of the stored value and insurance function of US dollar assets. Second, the US pursues the “New Monroe Doctrine” and weaponizes monetary instruments. As a result, emerging economies have increased their gold holdings, hedging, or sanctions. Third, a single conflict may not immediately drive up the price of gold, but repeated conflicts will increase long-term will. Global central bank gold purchases clearly rebounded in the second quarter. The central bank of China continued to increase its holdings during the gold price adjustment process. “Buying as it falls” is the most direct reason why the bottom of the gold price continues to rise.
Mid-term pricing: actual interest rates may not rise above expectations during the year
First, the real interest rate is still the starting point for judging the medium term direction of gold, but this round can no longer be reduced to a linear negative correlation — real interest rates constrain valuation, and the central bank and ETF determine the direction and magnitude of the price deviation from this constraint. We expect the Federal Reserve to keep interest rates unchanged during the year: there is no spillover from oil inflation as trend inflation, the wage-price spiral continues to cool down, employment recovery is falsified, and the fall in the unemployment rate is more of a “false drop” driven by labor withdrawal. The real risk is that the “debt police” will drive the long-term out of control, but even if they are forced to raise interest rates once, the purpose is more likely to stabilize expectations than to initiate continued austerity. Second, joint intervention narrows the dollar's upside. The US dollar index may still fluctuate strongly in the short term, but the room for a systemic breakthrough has narrowed further: the Federal Reserve may not stand still during the year; Europe and Japan have already tightened ahead of schedule, and interest spreads lack a basis for continued expansion; the joint intervention of the US and Japan has also included the unilateral upward trend of the US dollar against the yen as a policy constraint. The synchronicity between gold and US stocks has recently declined, and the resonance of early liquidity and trend trading is waning, and gold is once again reflecting more sovereign credit, real interest rates, and safe-haven needs.
Short-term momentum is improving
The price rises to the moving average → CTA relieves selling pressure → the return of subjective capital and ETF. The return of ETFs and trend improvements confirmed bottoming out. In July, global gold ETFs changed from net outflows to net inflows, Asian purchases continued, and North America ended a significant reduction in holdings; the subsequent slope still depends on whether North American capital can continue to return. The weight of price discovery continues to shift to Asia, which explains why there are still bottom-line undertakers during the downward phase. COMEX has returned to the 60-day EMA, and asset management institutions' net longings have rebounded, and the direction has changed to rebuild positions.
Risk Alerts
The Federal Reserve turned hawk beyond expectations, the geographical conflict once again escalated to push up oil prices, and structured buying was weaker than expected.