Hong Kong Stock Concept Tracking | The Federal Reserve cuts interest rates by 50 basis points more than expected! Spot gold breaks through $2600 to hit a historical high, opening up a whole new upside space for gold (with concept stocks)

According to the Wise Finance APP, on Wednesday, Eastern Time, the FOMC meeting of the Federal Reserve lowered the federal funds rate target range by 50 basis points to 4.75%-5.00%, marking the first rate cut since March 2020. Gold showed strength after the Fed's September statement. At the New York closing on Thursday (September 19), spot gold rose by 1.09% to $2586.74 per ounce, with an intraday trading range of $2551.41-$2594.90, approaching the historical high of $2600.16 set after the Fed announced a larger-than-expected 50 basis point rate cut on Wednesday. Debon Securities stated that with the implementation of this Fed rate cut, if there are no new catalysts in the short term, the gold price is expected to fluctuate around $2600 per ounce. Historically, gold prices tend to rise during rate cut cycles.

From the current rate cut situation, this 50 basis point rate cut exceeded market expectations. At the same time, the Fed's statement showed increased confidence in inflation, steadily moving towards 2%. The Fed lowered its 2024 U.S. GDP growth forecast to 2.0%; lowered the 2024 U.S. core PCE inflation forecast to 2.6%; and raised the 2024 U.S. unemployment rate forecast to 4.4%. Looking ahead to future rate cut expectations, Fed policymakers expect the federal funds rate to be 4.4% by the end of 2024, down from the June forecast of 5.1%; they expect the rate to be 3.4% by the end of 2025, down from the June forecast of 4.1%; and they expect rates of 2.9% by the end of 2026 and 2027, down from the June forecasts of 3.1% and 2.8% respectively.

The Fed rate cut marks the beginning of a change in U.S. monetary policy. With the implementation of the rate cut, the gold price may converge towards $2600. However, on the other hand, the London gold price quickly fell back after reaching $2600, closing around $2560 per ounce on the 19th, bringing some selling pressure from the larger-than-expected rate cut. As of September 10, 2024, COMEX gold net long positions were around 24,231 contracts, close to the levels before the Fed rate cut in 2022. With the rate cut in place, if there are no new catalysts, the short-term judgment is that the gold price will fluctuate around $2600 per ounce.

Historically, gold prices tend to rise during rate cut cycles. According to institutional calculations, understanding gold price changes on a monthly basis and real interest rate changes, from February 2000 to June 2024: 1) the average modified duration of gold is 56, with an average convexity of 88033; 2) the results of the second regression are y=0+(-11.4251)*x^1+(14.3731)*x^2. These parameters can provide some reference for the extent of gold price changes with future rate cuts, potentially opening up new upward space for gold prices.

In early July, gold prices continued to rise significantly, reaching $2,484 per ounce on the 17th, hitting a historical high. Subsequently, due to profit-taking by investors and increased market volatility, gold prices retreated slightly but still retained most of the recent gains, reaching new historical highs again after the September rate cut The resilience of gold prices largely reflects the attractiveness of gold as a safe-haven asset in the high uncertainty of the economic and geopolitical environment. Professional investors' bullish sentiment towards gold is increasing, and a considerable number of investors are waiting for better prices to enter the gold market. Therefore, it is not surprising that there has been a large influx of buying orders during the recent decline in gold prices, significantly pushing up the bottom price of gold.

The trading conditions of major gold investment products all reflect a strong bullish sentiment. In mid-July, the net long positions of CME (Chicago Mercantile Exchange Group) gold futures reached a four-year high, and despite some profit-taking in the later part of the month, it only slightly retreated. Similarly, funds flowed into gold ETPs (Exchange-Traded Products) for the third consecutive month in July, with the total holdings climbing to a five-month high in the later part of July.

The increasing interest of investors in gold helps offset the impact of the recent slowdown in official sector gold purchases worldwide. It is worth emphasizing that although the pace of buying has slowed down, the total gold purchases by the official sector remain robust when measured against historical standards. Against the backdrop of escalating geopolitical tensions and growing concerns over sovereign debt issues in the US and Europe, official sectors still have sufficient reasons to diversify their international reserves.

Looking ahead, given the numerous macroeconomic and geopolitical uncertainties that will continue to favor gold investments, MetalsFocus remains bullish on the outlook for gold.

In the short term, considering the escalating concerns about economic recession, the unwinding of carry trades, and the US stock market still being at high levels, there is still room for further selling pressure. Volatility remains high, and the risk of further deleveraging may limit the upside potential of gold prices. Once the interest rate cut cycle begins in September, both bond yields and the US dollar exchange rate may decline more significantly. This is expected to drive further funds into the gold market, and accordingly, gold prices are likely to hit new highs from the fourth quarter of 2024 to the second quarter of 2025.

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Zijin Mining (02899): The company's main source of profit comes from copper and gold mining. In the first half of the year, the company's copper production from mines was 518,570 tons, a year-on-year increase of 5.3%, and gold production from mines was 35,406 kilograms, a year-on-year increase of 9.5%. During this period, the third phase of the Kamoa Copper Mine was completed and put into production half a year ahead of schedule. After reaching full production, the annual copper production will increase to over 600,000 tons, making it the largest copper mine in Africa and the third largest in the world. The Savary Gold Mine's 2.4 million tons/year mining and selection and 5 tons/year gold smelting project were completed and put into operation as scheduled. With the orderly progress of the company's main mining projects and the expectation of maintaining high gold and copper prices, the company's performance growth is guaranteed.

Shandong Gold (01787): According to a Morgan Stanley report, against the backdrop of soaring gold prices, Shandong Gold continues to enjoy a strong profit trend. The company's production growth comes from the further resumption of work at the Linglong Mine, the expected start of production at the Ghanaian Cardino (Cardinal) project in the last quarter, and the contribution from the 28.89% stake in its subsidiary, Yintai Gold (000975.SZ) (now known as Shandong Gold International) Lao Pu Gold (06181): In the first half of 2024, Lao Pu Gold's revenue and net profit increased by as much as 148% and 199% year-on-year respectively. Despite the high volatility of gold prices and the downturn in the gold jewelry industry since Q2, its growth performance is particularly outstanding. This is mainly due to the strong product strength of the company. With the explosive popularity on social content platforms such as Xiaohongshu (Little Red Book), the company's brand successfully broke through, leading to a rapid increase in the number of consumers