On January 27, data released by the China Gold Association showed that in 2021, the actual consumption of gold in the country was 1120.90 tons, an increase of 36.53% compared with the same period in 2020 and an increase of 11.78% over the same period before the epidemic.
The mainland is a major global gold consumer, and with the Spring Festival of the Year of the Tiger approaching, gift consumption represented by gold has also entered the peak season. Recently, the reporter saw in some gold jewelry malls in Zhengzhou that the tiger year gold banknotes, gold bars and different shapes of the tiger year gold jewelry are placed in the most conspicuous position, attracting many consumers to buy. The Spring Festival is coming, can gold consumption usher in a peak? What kind of gold products are more popular?
The gold consumer market heated up before the Spring Festival
Recently, the reporter visited Zhengzhou Dennis, Guomao 360 and other shopping malls and found that gold promotion activities are in full swing, of which the zodiac gold jewelry and wedding jewelry categories are sold more. "Compared to last year, there has been a significant increase in sales of gold in shopping malls recently." A teller at Dennis on Zhengzhou Navigation Road told reporters, "Recently we delayed leaving work until 23:00 at night. ”
At the mall, a middle-aged man is buying gold bills and the Year of the Tiger zodiac for his two children. "A gold bill has a gram, 500 yuan a piece, and it is more meaningful to give gold money to children on the first day of the New Year than to find gold." This zodiac sign buys one for the child every year, and when he is 12 years old, he can collect 12, which is also very meaningful for the child's growth. The middle-aged man said.
Why do people love to buy gold?
"Near the Spring Festival, the demand for gold has increased significantly, on the one hand, consumers have excess cash in their hands but can not be used for optional consumption such as travel, under the stimulation of related measures such as the Promotion of Consumption in the New Year, the sales of physical gold jewelry have also risen steadily; on the other hand, in recent years, people's consumption concepts have become more rational, more willing to pursue both quality and cost-effective consumption, gold can better meet the needs of this part of the people." GF Futures precious metals researcher Ye Qianning said.
The reporter learned from the gold jewelry counter that the current ancient gold is very popular, especially bracelets and the like. However, now an ancient gold bracelet plus labor costs, get 16,000 yuan (30 grams), the price is relatively expensive.
"In the past two years, there are more people who have bought ancient fa gold, after all, it is the most popular craft in these two years." Dennis said a counter agent.
Gold demand mainly includes jewelry consumption, industrial consumption and investment and other aspects of demand, general jewelry consumption demand accounted for a relatively high proportion, while investment demand and industrial demand accounted for a relatively small proportion. According to the data released by the China Gold Association, the actual consumption of gold in the country in 2021 was 1120.90 tons, an increase of 36.53% compared with the same period in 2020, an increase of 11.78% over 2019 before the epidemic, of which the consumption of gold jewelry was 711.29 tons, an increase of 44.99% over the same period in 2020. "Since 2021, with the gradual improvement of the domestic epidemic prevention and control situation, gold consumption demand has continued to be released, and residents' demand for gold and silver jewelry has increased. As a traditional Chinese festival, the Spring Festival is approaching, and various gold and silver jewelry have also entered the peak consumption season, and the demand for gold has increased. Huishang Futures precious metals analyst from Shanshan said.
Wang Wenhu, a precious metals researcher at Hongyuan Futures, believes that the consumption mode of gold jewelry continues to innovate, retail companies continue to carry out various forms of online marketing activities such as online live broadcasting, and processing companies continue to develop lightweight new categories of gold jewelry to meet the aesthetic needs of young consumers. In addition, the tightening of global liquidity represented by the Federal Reserve has made investors more and more worried about global economic growth, superimposed on the global new crown pneumonia epidemic, the conflict between Russia and Ukraine, the Middle East issue, the Iranian nuclear issue, the Afghan issue, etc., and the market's investment and hedging demand for gold such as gold bars and coins has increased.
Is it currently appropriate for investors to buy gold?
On January 27, data released by the China Gold Association showed that domestic raw material gold production in 2021 was 328.98 tons, down 36.36 tons from 2020, down 9.95% year-on-year. Among them, the gold ore gold completed 258.09 tons, and the non-ferrous by-product gold completed 70.89 tons. In addition, in 2021, the imported raw material production was 114.58 tons, up 0.37% year-on-year, and if this part of the imported raw material production was added, the total production of gold in 2021 was 443.56 tons, down 7.50% year-on-year. "The main reason for the decline in domestic gold production in 2021 is the phased suspension of production in Shandong Province and Henan Province, which is the main reason for the decline in national gold production." From Shanshan said.
Ye Qianning told reporters that China's gold production has declined for 5 consecutive years, one is that some mines are in nature reserves and need to be withdrawn according to law, but the new production projects have not been produced; second, after the cyanide tailings and cyanide-containing wastewater treatment sludge produced in the gold processing process in 2021 are included in hazardous waste, the environmental protection supervision efforts continue to increase, which has a greater impact on the production of small and medium-sized mines that do not meet the exemption conditions in the disposal process; third, the cost required for miners to apply for mining licenses is larger, affecting the progress of new projects.
Compared with 2020, the closing price of Shanghai gold futures in 2021 fell by 5.16%, and the average closing price was 375.79 yuan / g. The average closing price of Shanghai gold futures in 2019 was 314.78 yuan / g, up 21.05% for the whole year. The average closing price of Shanghai gold futures in 2020 was 389.53 yuan / g, up 13.98% for the whole year.
From Shanshan's introduction, the price of gold has pulled back sharply in recent trading days, and the current price has fallen back to the level of the beginning of 2021. In 2021, as the global economy continues to recover, expectations of Fed policy tightening are gradually heating up, the dollar index continues to strengthen, and the oscillation of the precious metals sector has fallen. At present, gold is still in a downward trend, the main logic of market trading in 2022 is the Fed interest rate hike rhythm, from the results of the January Fed policy meeting, the Fed's attitude towards interest rate hikes is hawkish, and claims not to rule out raising interest rates at every FOMC meeting, in the face of the Fed's tough interest rate hike attitude, US Treasury yields, the US dollar index oscillated upwards to bearish gold prices. Therefore, before the Fed's interest rate cut expectations landed, gold may still oscillate weakly.
Wang Wenhu believes that with the central banks represented by the Federal Reserve successively tightening monetary policy and the gradual easing of the global new crown pneumonia epidemic, the center of gravity of gold prices has shown an oscillating downward trend, and it is expected that the gold price in the second and third quarters of 2022 will have the best buying point, at which time, investors can buy gold and hold it for a long time.
"Compared with the performance of gold in the last round of fed interest rate hikes + balance sheet reduction cycle, due to the narrowing of the current round of tightening cycle, it is expected that the short-term volatility brought to gold will be relatively greater." Ye Qianning said that from a historical point of view, market expectations in the early stage of the brewing is often overestimated, in the case of the global epidemic is still disturbed, the most important purpose of the Fed tightening is to curb the continuation of high inflation, if the late epidemic control has a large progress and is alleviated, or hawkish interest rate hikes lead to signs of another recession in the US economy, the Fed may need to relax monetary policy again, so the interest rate level continues to rise The space is limited. Gold is generally undervalued after the 2021 correction, with long-term hedging risks and inflation-resistant value as global central bank monetary policy remains generally accommodative.
From historical experience, in the process of interest rate hikes and balance sheet reductions by the Federal Reserve, the price of gold will not continue to decline, specifically, from December 15, 2015 to September 20, 2017, the Fed interest rate hike stage, COMEX gold and Shanghai gold futures rose by 22.67% and 23.64% respectively; from September 21, 2017 to December 18, 2018, when the Fed raised interest rates and reduced its balance sheet at the same time, the PRICE of COMEX gold futures fell by 4.79%, and the price of Shanghai gold futures rose by 0.66%; from December 19, 2018 to September 30, 2019, the price of COMEX gold and Shanghai gold futures rose by 17.92% and 22.55% respectively.
Wang Wenhu believes that although the rise in short-end interest rates and the decline in inflation expectations will put pressure on gold prices, the long-term trend of long-end interest rates on US bonds is still dominated by economic growth expectations, and may flatten in the interest rate hike and balance sheet reduction cycle, which will not form a sustained pressure on gold prices. Because at some stage of the future monetary tightening cycle, especially after the safe-haven funds accumulated during the new crown pneumonia epidemic gradually withdraw from the gold market, the expected slowdown in global economic growth will also drag down the long-end interest rate fluctuation center of US Treasuries, and the market's allocation demand for gold may be supported by safe-haven preferences and speculative positions, and the gold market may rise in stages.
Goldman Sachs: It's time to buy gold!
Goldman Sachs analyst Mikhail Sprogis and others said on Jan. 26 that it was time to buy some defensive assets such as gold.
Goldman Sachs was a gold bull last year, but was eventually punched in the face by the market. Goldman Sachs believed at the time that gold would rise as high as $2,000 an ounce, driven by a weak dollar and emerging market demand. But with advanced economies growing better than emerging markets last year and expecting inflation to be only temporary, gold fundamentals weakened, eventually falling 7% for the full year of 2021.
This year, Goldman Sachs continued to be bullish on gold in the report, raising the gold price forecast from $2000/ton to $2150/ton. The reason is that the growth rate of advanced economies dominated by the United States is slowing, and high inflation will generate gold investment demand. At the same time, the recovery of emerging market economies will generate gold consumer demand.
In other words, Goldman Sachs believes that gold will become a defensive asset against high inflation this year.
Goldman Sachs pointed out that while both gold and Bitcoin have the function of hedging inflation, the logic of the two is different. Gold is an inflation-hedged asset under risk-off, while Bitcoin is an inflation-hedged asset under risk-on. As the Fed accelerates its tightening to fight inflation, and while the U.S. economy is not yet in recession, Goldman Sachs expects a significant decline in U.S. economic growth and a reversal of risk sentiment (from risk-on to risk-off) in the interest rate hike cycle, which will be the main logic driving gold up.
Goldman Sachs believes that recession risk is a key barometer of investors' preference for gold. For example, the recent rapid rise in real interest rates has made gold's performance very "elastic". This tends to happen late in the cycle, when demand for safe-haven assets begins to rise. Expectations of a US recession probability will be a core driver of gold-backed ETF inflows. The rapid growth of the US economy and the relaxed financial environment in 2021 make the market not worry about the risk of recession at all. By 2022, however, market expectations for the U.S. economic outlook are deteriorating.
Goldman Sachs believes that the stabilization of the US dollar and emerging market demand will also be a boost to gold's rise. With the market roughly factoring in the risk of multiple Fed rate hikes, the dollar is expected to stabilize this year with slight downside risks. The fading of this "headwind" will lead to an increase in consumer demand for gold in emerging markets.
In addition, Goldman Sachs also pointed out that gold is also the "ultimate hedge" of geopolitical conflicts. When geopolitical risks are severe enough to affect the U.S. economy, gold becomes an effective hedge. Examples include 9/11 in 2001 and the 2003 Afghan war. If geopolitical risks have little impact on the United States, gold's gains will be limited.
This article originated from Futures Daily