Hong Kong Stock Concept Tracking | With the approaching of the Spring Festival, the "gold rush" is on again! Long Element Jewelry is being snapped up. Will the gold price continue to rise? (With concept stocks attached)

Zhitong App learned that on January 25th, the US released GDP data that exceeded expectations, and the international gold price first fell and then rose. COMEX gold futures prices rose by 0.25% to $2021 per ounce, intensifying the market's long and short game. Despite the international gold price experiencing some correction compared to the beginning of the year, many institutions and investors still have a positive outlook on the gold trend in 2024.

As one of the best-performing assets in 2023, gold rose by 15%, setting a record for the highest annual closing. Strong demand for central bank gold purchases has provided price support for gold over a longer time frame. The World Gold Council stated that the significant gold purchases by central banks globally have supported the strong performance of gold beyond market expectations.

According to the State Administration of Foreign Exchange, China's gold reserves at the end of December 2023 were 71.87 million ounces, an increase for the 14th consecutive month from 71.58 million ounces at the end of November. Since the central bank resumed gold purchases in November 2022, it has accumulated an additional 9.23 million ounces of gold. Based on the average price range, the corresponding purchase amount is approximately 130 billion yuan.

In addition to China, the latest data released by the World Gold Council in January 2024 shows that as of the end of November 2023, the gold reserves of the United States have reached 8,133.5 tons, and Germany's gold reserves are 3,352.6 tons. China's gold reserves account for 4.3% of its official reserves, while the gold reserves of the United States, Germany, Italy, and France during the same period all exceed 65%.

In 2023, the World Gold Council estimated that the unexpected increase in central bank gold purchases contributed to about 10% of the gold performance, and central banks of various countries may continue the trend of gold purchases in 2024. Even if 2024 does not reach the high points of the previous two years, it is expected that any gold purchase volume above the trend line (i.e., gold purchases exceeding 450-500 tons) will provide additional momentum.

At the same time, gold investment and jewelry demand play an important role in global gold demand. In terms of gold retail investment, data released by the World Gold Council shows that in the first three quarters of 2023, global demand for gold bars and coins was 876 tons, and global demand for gold jewelry consumption was 1,467 tons. According to statistics from the China Gold Association, in 2023, the national gold consumption was 1,089.69 tons, an increase of 8.78% compared to the same period in 2022. Among them, gold jewelry was 706.48 tons, a year-on-year increase of 7.97%; gold bars and coins were 299.60 tons, a year-on-year increase of 15.70%; industrial and other uses of gold were 83.61 tons, a year-on-year decrease of 5.50%.

At the same time, with less than half a month until the Spring Festival, the gold retail market has once again ignited a "gold rush." It is reported that recently, the crowded Shuibei Market in Shenzhen, the largest gold and jewelry trading venue in China, has seen a surge in visitors. Some merchants pointed out that the period before the Chinese New Year until early March is the peak season for gold sales every year. This year's business is particularly booming, with sales increasing by about 30% compared to last year. Customers flocked to the counters of renowned gold brands such as Chow Sang Sang, Chow Tai Fook, Lukfook, and Lao Feng Xiang. Gold products featuring the "dragon element" were also highly sought after by consumers, including dragon year commemorative gold bars and dragon year commemorative gold notes.

The hot gold jewelry consumer market has also validated the performance of listed companies. According to unaudited key operating data released by Chow Tai Fook for the three months ending on December 31, 2023, the company's overall retail value increased by 46.1% compared to the same period last year. Chow Sang Sang announced that as of December 31, 2023, the total number of its stores reached 5,106, including 331 self-operated stores and 4,775 franchise stores. The company opened a net of 490 stores in 2023, exceeding its annual target of 400 net store additions.

Zhang Junhao, an analyst at Guosen Securities, believes that reviewing the trend of the gold and jewelry industry in recent years, there has been a certain degree of upward trend in the overall gold and jewelry sector due to the demand for gold purchases at the end of the year and the beginning of the year. With the extended duration of the 2024 Spring Festival holiday and its relatively late timing compared to last year, consumers' gold purchasing cycle is expected to lengthen once again.

Multiple institutions hold an optimistic attitude towards the future trend of gold. The World Gold Council stated that after experiencing a surge in 2023, a combination of geopolitical tensions and continued central bank buying should continue to boost gold prices in 2024.

Wanjia Fund expressed a positive outlook on the new upward cycle of gold. Gold is a high-quality asset that can hedge against long-term inflation and serve as an anchor for measuring the value of fiat currencies. As a leader in the cyclical market, gold will not be absent in each round of commodity market cycles, and the high elasticity of gold stocks in relation to gold prices is also worth looking forward to.

Guojin Securities pointed out that after the weakening of supply and demand factors, gold price analysis will return to the framework of real interest rates at the medium-term level. Under the framework of real interest rates, gold stocks are currently in the right-side allocation period before the Federal Reserve stops raising interest rates and clearly signals a rate cut. Moreover, the relative returns of gold stocks have not fully realized the expected increase in gold prices. It is expected that gold stocks will enter a major uptrend after the Federal Reserve clearly signals a rate cut. Currently, due to the uncertainty in the overall liquidity situation in the United States, the Federal Reserve may slow down or halt the process of balance sheet reduction ahead of schedule, similar to the situation in 2019, gradually approaching the starting point of the formal release of the rate cut signal and the launch of the main uptrend of gold stocks.

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Chow Tai Fook (01929): Guosheng Securities pointed out that as a leader in the jewelry industry, the company is accelerating its expansion in lower-tier cities on the distribution side, optimizing design on the product side, and attaching importance to reaching consumers. We expect the company's net profit attributable to shareholders to be HKD 6.789 billion / HKD 8.313 billion / HKD 9.952 billion for FY2024-2026, corresponding to a FY2024 PE ratio of 20 times, and maintain a "buy" rating.

Chow Sang Sang (00116): Chow Sang Sang is a well-known jewelry brand originating from China. Its business covers mainland China, Hong Kong, Macau, and Taiwan, with over 500 self-operated stores and a comprehensive online shopping service. Da Tang Tongjin (08299): For the six months ended September 30, 2023, the company's revenue was approximately HKD 84.83 million, an increase of approximately 7.5% YoY; net profit was HKD 15.352 million, a decrease of 16.03% YoY.

Zhaojin Mining (01818): In the first three quarters of 2023, the company's revenue was approximately CNY 6.385 billion, an increase of 10.29% YoY; net profit attributable to the owners of the parent company was approximately CNY 3.653 billion, an increase of 37.69% YoY.