According to the intelligence finance APP, Huayuan Securities released a research report stating that gold has four attributes: financial, currency, hedging and commodity. The US actual interest rate is the preferred indicator in the long-term dimension. In the short and medium-term dimension, the trend of US economic data is declining, and the expectation of interest rate cuts is rising. Gold price has reached a historical high. In the long-term dimension, the new paradigm framework is about to come out. With the strong purchase of gold by the central bank and the growth of the US currency supply, the long-term center of gold is expected to continuously rise. Under the resonance of the old and new paradigms, the performance of gold related companies is expected to gradually realize growth, and this team continues to be bullish on the gold sector configuration opportunities.

Gold pricing framework: Gold has four attributes: financial, currency, hedging and commodity, and the actual interest rate of the US dollar is the preferred indicator in the long-term dimension. Gold has four attributes: financial, currency, hedging and commodity. (1) The financial attribute corresponds to the actual interest rate framework. The opportunity cost of holding gold can be used as an important measuring indicator. The price of gold and the 10-year US Treasury yield/TIPS yield are negatively correlated, which is a preferred indicator in the long-term dimension. (2) The currency attribute corresponds to the substitution of the US dollar. The price of gold and the US dollar index are negatively correlated, and the overall relationship is weaker than that of the actual interest rate. (3) The hedging attribute corresponds to the selection of hedging assets by investors to achieve the purpose of maintaining value and increasing value in the event of risk events. It is necessary to pay attention to the size of risk events and the duration (whether there is substantial impact on economic policies). (4) The commodity attribute corresponds to the global gold supply and demand. Its commodity explanation is relatively weak, but in recent years, the global central bank's purchase of gold has become an important marginal increment, increasing from 254.9 tons in 2020 to 1037.4 tons in 2023.

In the short to medium term, US economic data is trending weaker, interest rate expectations are rising, and gold prices are reaching new highs. (1) US inflation data has steadily declined since 2022. Since May this year, it has fallen below expectations for two consecutive times, with the CPI actual value compared to the same period last year being 3.0%. (2) Economic indicators and employment data are steadily declining. The ISM manufacturing PMI has been declining year-on-year since 2022, with the July 2024 data being 46.8%; in the same period, the number of new non-farm employment has fluctuated and fallen, from 0.862 million people in February 2022 to 0.114 million people in July 2024. (3) The FOMC meeting is gradually brewing an atmosphere of interest rate cuts. The June dot plot expects one interest rate cut this year, and there may be three interest rate cuts this year. (The FedWatch tool shows that on August 6th, the market priced the probability of three interest rate cuts this year with a total of 100 basis points at 47.7%).

In the long-term dimension, with the new paradigm framework coming out, the strong purchase of gold by the central bank, the growth of the US currency supply, and changes in the geopolitical situation, the long-term center of gold is expected to continue to rise. (1) In recent years, the structure of gold investors has undergone two trends of "moving east and retreating west" and continuous increase in central bank holdings. The SPDR Gold ETF is an important channel for Western investors to buy gold. In recent years, its holdings have continued to decline, while net purchases of gold by central banks worldwide have continued to increase, replacing it as an important force on the demand side of gold. At the same time, the Chinese central bank has been buying gold for 18 consecutive months since November 2022, during which time it has accumulated an additional 10.16 million ounces of gold, contributing an important increase in demand. (2) In the long-term perspective, the M2 money supply in the United States continues to grow, the center of the actual interest rate of the US dollar is moving down, and the leverage ratio of various departments in the United States continues to rise (showing internal structural changes where household sector is deleveraging and government sector is leveraging up in recent years), these factors jointly push the center of gold price in USD terms up.

2024 vs. 2019: What are the similarities and differences between gold in the expected interest rate cut at that time and the present? According to Huayuan Securities' review of the two important cycles of gold, the following summary can be reached: From 2018 to 2022, gold went through a complete cycle of interest rate cuts and hikes. Under the continuous fermentation of the epidemic event, gold has gone through a special bull-bear cycle. The actual interest rate framework has a good explanation effect throughout the whole period. From 2022 to 2024, gold fluctuated in the rise and fall of inflation, recession/interest rate expectations. It reached a historical high under the resonance of the old and new paradigms. The actual interest rate framework had a good explanation effect for most of the time, and the weight of the new paradigm emerged continuously in a period of time.

Under the resonance of the old and new paradigms, the long-term center of gold price is expected to continue to rise, and the performance of related companies is expected to gradually realize growth. Suggested focus: SD Gold, Yintai Gold, Chifeng Jilong Gold Mining, Zhongjin Gold Corp.,Ltd, and Hunan Gold Corporation.

Risk warning: The risk of large fluctuations in gold prices, the risk that new project production may not meet expectations due to geopolitical factors, the risk of fluctuations in gold demand, the uncertainty risk of the Fed's interest rate cuts, and the risk of sustained US inflation exceeding expectations.