Core view
The imbalance between supply and demand has intensified, and US inflation has remained high. Since 2021, with the continuous recovery of the U.S. economy, the mismatch between supply and demand has gradually emerged. In March 2022, the year-on-year growth rate of CPI in the United States increased to a new high of 8.5%. From the demand side, the total corporate profits of the United States in 2021 were $11.22 trillion, a significant increase over the level before the epidemic; With the release of superimposed subsidies, the personal income of U.S. residents has continued to increase and the asset liability ratio has continued to decline. At present, the momentum of personal consumption of U.S. residents has continued to release. By February 2022, the total scale of personal consumption expenditure in the United States had reached US $13.9 trillion, an increase of about 6.90% over the same period in 2021. From the supply side, in the short term, the labor supply in the United States is limited and the number of job vacancies is high. As of March 2022, the labor participation rate in the United States was 62.4%, a gap of 1PCT compared with that before the outbreak in February 2020. As of February 2022, the number of non farm job vacancies in the United States was 11.266 million, the highest level since 2000. In the long run, trade protectionism and anti globalization are on the rise. With the superposition of European and American sanctions against Russia, the long-term total supply scale may be disturbed to some extent.
At the subdivision level, most sub projects have upward momentum, and the US CPI is easy to rise but difficult to fall. The high level of inflation in the United States is mainly driven by two sub projects: energy and food. In terms of energy, as of March 2022, CPI energy projects in the United States had increased by 32% year-on-year. In terms of breakdown, fuel oil and other fuel projects in energy commodities had increased by about 51.7% year-on-year, and vehicle oil projects had increased by about 48.2% year-on-year. It is expected that as Russia, a major energy exporter, continues to be subject to international sanctions, global energy prices may continue to operate at a high level, which may drive the price of energy products in the United States higher in the future. In terms of food, as of March 2022, CPI food projects in the United States had increased by about 8.8% year-on-year. In terms of breakdown, meat and other household food items in household food increased significantly year-on-year, with a year-on-year increase of about 13.7% and 10.3% respectively. At present, the U.S. meat inventory level continues to decline. The initial U.S. pork inventory in 2022 was 202.0 kilotons, down 31.3% from 2020. It is expected that the CPI growth rate of U.S. food projects will continue to rise driven by the decline of meat and other food inventories.
The Fed began to raise interest rates and is expected to have a limited impact on inflation. First, during the six interest rate hikes since 1980, the year-on-year growth rate of CPI in the United States has continued to rise. During the six interest rate hikes, the year-on-year growth rate of CPI in the United States has increased by 0.7pct, 4.0pct, 0.3pct, 1.1pct, 1.0pct and 1.7pct respectively. Therefore, the impact of interest rate hikes on inflation may be limited in the short term. Secondly, at present, the capacity utilization rate of the U.S. industrial sector is close to the historical peak. In March 2022, the capacity utilization rate of the U.S. industrial sector reached 78.3%, and in 2020, the cumulative fixed asset investment in the United States decreased by 0.54% year-on-year, and the growth rate of fixed asset investment fell for two consecutive years. The current interest rate increase policy of the Federal Reserve may have a certain impact on enterprise investment, thus limiting the recovery of the growth rate of fixed asset investment in the United States. In this case, the total supply scale of the United States may be further limited.
Gold has an obvious role in preserving value. Under the high inflation in the United States, the gold industry has ushered in an excellent allocation opportunity. In terms of gold, the return rate of gold is particularly excellent in the high inflation environment. According to the statistics of the World Gold Council, the nominal return of gold is about 11.19% in the high inflation (> 3%) market environment, which is higher than its return level in the low inflation environment. In terms of gold stocks, gold stocks generally rose by a large margin when the price of gold rose sharply. During the gold bull market from 2018 to 2020, the current price of gold in London rose from US $1182.7/oz to US $2063.1/oz, up 74.4%, while Chifeng Jilong Gold Mining Co.Ltd(600988) share price rose by 435.6%, Yintai Gold Co.Ltd(000975) share price rose by 140.6%, and Shandong Humon Smelting Co.Ltd(002237) share price rose by 132.1%.
Investment advice
High inflation in the United States may drive the gold price upward, and relevant production enterprises in the gold industry may benefit, such as Chifeng Jilong Gold Mining Co.Ltd(600988) , Zijin Mining Group Company Limited(601899) , Shandong Gold Mining Co.Ltd(600547) , etc.
Risk tips
International geopolitical changes, abnormal fluctuations in commodity prices and changes in macroeconomic policies.
