Hong Kong Stock Concept Tracking | The Fed does not need to wait for inflation to drop below 2% to cut interest rates Gold prices have further drive (with concept stocks)
The price of gold is expected to be driven by the anticipation of a rate cut by the Federal Reserve, potentially creating a good buying opportunity. In addition, gold stocks, although performing poorly, are undervalued and may rise by 50%. Considering the impact of the election and the US government's increase in capital expenditure, the price of gold is synchronous with the US fiscal deficit, indicating further upside potential for the gold price. Related companies include Lingbao Gold, Zijin Mining, Shandong Gold, Zhaojin Mining, and China Gold International
During the Federal Reserve interest rate meeting in December 2023, Federal Reserve Chairman Powell stated that the monetary policy in 2024 will be marginally loose, leading to further market expectations of a Fed rate cut. Meanwhile, the prices of precious metals represented by international gold have been steadily rising.
Chairman Powell's "dovish" remarks at the US Congress hearing have fueled market expectations of a Fed rate cut. Powell believes that the Fed does not need to wait for inflation to fall below 2% before cutting rates.
Institutional sources suggest that a cooling US job market and a decline in inflation levels will trigger a preventive rate cut, with the Fed expected to start cutting rates in September this year.
On July 10th, Schroders stated that geopolitical tensions and financial fragility are driving continuous growth in gold demand, potentially triggering one of the strongest bull markets since President Nixon closed the "gold window" in November 1971, ending the gold-dollar exchange. Additionally, despite the continuous rise in gold prices, the performance of gold stocks still lags behind, and it is not an exaggeration to say that gold stocks could rise by 50%, as their valuation remains cheap. If it is necessary to include gold stocks in long-term precious metal investment allocations, the institution believes that now is the right time.
Industry insiders indicate that the current rise in international gold prices is mainly driven by expectations of the Fed's monetary policy.
Although rate cut expectations have been repeatedly delayed, the overall direction towards rate cuts by the Fed is certain, and the market will continue to "front-run" rate cut expectations.
Furthermore, considering the upcoming elections, the US government will continue to increase capital spending to maintain high economic growth. Historical experience shows a good synchronicity between gold prices and the US fiscal deficit, indicating that there is still room for gold prices to rise in the future.
Gold-related companies include:
Zhaojin Mining (03330), Zijin Mining (02899), Shandong Gold (01787), Zhaojin Mining (01818), China Gold International (02099), etc