Event: Recently, the conflict between Russia and Ukraine escalated, overseas inflation remained high, and the price of gold tended to rise. The price of spot gold in London rose from $1797 / oz in early February 2022 to $1914 / oz, and closed at $1898 / oz on February 22, with an increase of 6%.
The four correlation indicators play an important guiding role in gold prices. In “constructing strong relevant indicators to lead large gold investment – in-depth report of gold industry”, we put forward that the commodity attribute of gold is not the main determinant of gold price, and put forward four relevant factors affecting gold price. Among them, gold ETF position and US bond real interest rate expectation (TIPS) play a guiding role in short-term gold price, Marshall K value and total liabilities of the Federal Reserve play a guiding role in medium and long-term gold prices.
Short term indicators: Gold ETF positions and US bond real interest rate expectations have guidance on short-term gold prices. 1) Looking back from historical data, the correlation between global gold ETF positions and gold prices is as high as 0.97. Considering the timeliness of data acquisition, the correlation between the positions of the world’s top two gold ETFs (SPDR and iShares) with daily updated data is also as high as 0.94, which plays an important guiding role in the trend of short-term gold prices; 2) There is an obvious negative correlation between the gold price and the expectation of the real interest rate of US bonds, and the correlation coefficient between the gold price and the five-year tips of US bonds is -0.86.
Long term indicators: Marshall K value and total liabilities of the Federal Reserve play a guiding role in medium and long-term gold prices. 1) When the growth rate of broad money supply M2 is higher than that of real economy GDP, the money supply is “surplus”, and the reduction of unit money value makes the price of gold as a general equivalent rise. The correlation between Marshall K value (m2 / GDP) and gold price in the world’s top five economies reached 0.93 from 1980 to 2020, The year-on-year growth rate of K value plays a guiding role in judging the inflection point of gold price in advance; (2) Gold is essentially a hedge against US dollar credit. When the Federal Reserve’s liabilities expand on a large scale, the price of gold is easier to rise. The correlation coefficient between the two is 0.81 from January 1, 2003 to February 16, 2022.
The greater elasticity of gold price rise to the market value of listed companies is Zhaojin mining industry, Zhongjin Gold Corp.Ltd(600489) , Shandong Gold Mining Co.Ltd(600547) and Chifeng Jilong Gold Mining Co.Ltd(600988) . We believe that the share prices of gold listed companies are ahead of the historical high of Shanghai gold price, but basically synchronized with the phased high of Shanghai gold price. From the perspective of the market value elasticity of the rise of gold price to listed companies, the elasticity of the gold industry of H shares is the largest (7.94%), and the elasticity of A-Shares is Zhongjin Gold Corp.Ltd(600489) (3.99%), Shandong Gold Mining Co.Ltd(600547) (3.14%) and Chifeng Jilong Gold Mining Co.Ltd(600988) (2.96%).
Investment suggestion: pay attention to the allocation value of gold sector. In the short term, the positions of the two major gold ETFs are in the stage of increasing positions; In the long run, the peak of year-on-year growth of Marshall K value in the world’s top five economies is about two years ahead of gold price, while the peak of year-on-year growth of Marshall K value is in 2020, and the peak of gold price is expected to appear in 2022. In the context of rising geopolitical risks, it is suggested to pay attention to the allocation value of the gold sector. From the perspective of market value elasticity, it is suggested to pay attention to Zhaojin mining industry (H shares), Zhongjin Gold Corp.Ltd(600489) , Shandong Gold Mining Co.Ltd(600547) , Chifeng Jilong Gold Mining Co.Ltd(600988) .
Risk tips: (1) uncertainty risk of macro-economy and liquidity; (2) Risk of failure of relevant indicators and leading indicators; (3) Geopolitical risk event and rapid exit risk; (4) The risk of inconsistency between gold stocks and gold prices.
