Understanding the Market | Gold Stocks Rise Again as Weak Non-Farm Data Combined with Central Bank's Continued Gold Purchases Leads to Gold's Best Performance This Year
Affected by the U.S. non-farm payroll data falling short of expectations and the People's Bank of China increasing its gold holdings for 21 consecutive months, international gold prices rebounded strongly, surging over 7% last week, marking the best weekly performance of the year. Against this backdrop, Hong Kong stocks in the gold sector rose collectively, with significant gains in individual stocks such as CHIFENG GOLD and Zijin Mining. Both UBS Group AG and BCA Research are optimistic about the medium to long-term prospects for gold, believing that the decline in real interest rates, the weakening of the U.S. dollar, and central bank gold purchases constitute core support, indicating that there is still upward potential for gold prices
According to Zhitong Finance APP, gold stocks have risen again. As of the time of publication, CHIFENG GOLD (06693) is up 5.7%, trading at HKD 39.66; ZIJIN GOLD INTERNATIONAL (02259) is up 4.74%, trading at HKD 143.6; LINGBAO GOLD (03330) is up 3.74%, trading at HKD 24.98; ZIJIN MINING (02899) is up 3.46%, trading at HKD 37.66; ZHAOJIN MINING (01818) is up 3.26%, trading at HKD 24.7.
On the news front, the disappointing non-farm data combined with the central bank's continued gold purchases has led to a strong rebound in international gold prices, which surged over 7% last week, marking the largest weekly increase of the year. The total number of non-farm jobs in the U.S. decreased by 23,000 in July, with the employment data for the previous two months revised down by 103,000, indicating a slowdown in overall hiring momentum. Following the data release, federal funds futures further lowered the pricing for interest rate hike expectations for the year. Additionally, the People's Bank of China continued to accelerate gold purchases in July, increasing by 19.91 tons month-on-month, marking the 21st consecutive month of increasing gold reserves.
UBS believes there are three major medium- to long-term supports for gold: the decline in real interest rates reigniting investment demand, the weakening dollar promoting diversification, and central banks continuing to purchase gold at high levels. They suggest viewing a drop in gold prices to USD 4,000 as a strategic buying opportunity. The chief strategist at BCA Research also stated that gold prices may have further upside potential, and even the possibility of reaching a new historical high cannot be ruled out
