The Zhitong Finance App learned that Guojin Securities released a research report saying that since 2023, the growth rate of the cost of gold stocks has slowed down. It is expected that with gold prices rising and costs are relatively stable this year, gold stocks will perform well. It is expected that gold stocks will usher in a major upward trend. With domestic social stocks being effectively eliminated in the second and third quarter, the price center of copper is expected to rise further. Expectations in the electrolytic aluminum sector are still quite poor. Domestic real estate support policies have continued to be strengthened recently, and the equity market's pessimistic expectations about the demand for electrolytic aluminum on the real estate side are expected to recover. It is recommended to focus on targets such as Shandong Gold (600547.SH), Hunan Gold (002155.SZ), Zijin Mining (601899.SH), Shenhuo Co., Ltd. (000933.SZ), and China Hongqiao (01378).

Incident: During the May Day holiday in China, the price of gold in London fell 0.54% to 2,294 yuan/ounce, the price of LME copper fell 0.63% to 9914 US dollars/ton, and the price of LME aluminum fell 1.18% to 2,551 US dollars/ton.

The main views of Guojin Securities are as follows:

The scale of quarterly bond issuance remains stable, and it is difficult for US bond yields to break through the 3Q23 high

On May 1, the US Treasury Department set the refinancing bond issuance scale for the May to July quarter at 125 billion US dollars, which is in line with market expectations, and will launch the first existing treasury bond repurchase operation in 20 years from the end of May to support liquidity and improve cash management. The tone for the second quarter refinancing conference was neutral. The ICC Macro Group expects the US deficit rate to fall slightly to 5.9% in the 2024 fiscal year. The size of the deficit is 1.69 trillion US dollars, which is slightly lower than last year's level. Based on factors such as the current state of the US economy, expectations of a decline in the deficit rate, and the huge scale of interest payments on bonds, Guojin Securities believes that it will be difficult for nominal interest rates on US bonds to break through the high of 3Q23.

Interest rate meetings were biased. QT Taper arrived as scheduled in June, and expectations of interest rate hikes during the year subsided

The Federal Reserve's May interest rate resolution keeps the federal funds rate target range unchanged, but starting in June, it will reduce the monthly redemption limit for US Treasury bonds from 60 billion US dollars to 25 billion US dollars, thereby slowing the rate of decline in its securities holdings. Powell stressed during the question-and-answer session at the press conference that the Federal Reserve's next move is unlikely to raise interest rates.

Guojin Securities believes that as long as interest rates are still expected to be at least not raised this year, then the impact of whether to cut interest rates and when to cut interest rates is more a matter of holding time. Delaying interest rate cuts will help gold companies to fully benefit from the sharp increase in performance brought about by the rise in gold prices, while the actual start of interest rate cuts will correspond to the gradual narrowing of the relative earnings of gold stocks. The benchmark interest rate range locks in the short-term interest rate limit, and it is also difficult for the medium to long term to break through the 3Q23 high. In the context of the continuation of the re-inflation logic, the price of gold is highly supportive under the real interest rate framework.

Non-agricultural data fluctuations have intensified, labor market gaps still exist, and wage inflation pressure has weakened

The number of non-farm payrolls in the US increased by 175,000 in April, and is expected to be 240,000. The value before March was raised from 303,000 to 315,000. The US non-farm payrolls data has fluctuated greatly in the past two months. The unemployment rate in April increased slightly from month to month, but it is still below 4%. Non-farm payrolls data has been revised frequently since '22, leading to a decrease in data stability and credibility. Currently, there is still a supply gap in the US labor market, and the rise in immigrants and non-American-born workers has gradually narrowed this gap. The wage growth rate is slowly declining, and the pressure on the inflationary side is gradually weakening.

The net purchase volume of global central banks increased year-on-year in 1Q24, and the Bank of Korea is considering joining the medium- to long-term gold purchase ranks. In the first quarter of 2024, the net gold purchase volume of global central banks reached 290 tons. This is the highest demand for gold purchased by central banks in the first quarter since the statistics were available, up 1% from the previous year. Total demand for gold, including the OTC market and other sources, was 1,238 tons, up 3% year over year, the strongest demand in the first quarter since 2016. The Bank of Korea said it is considering buying more gold in the medium to long term as foreign exchange reserves grow.

The inflationary logic continues, and the US economy expands without stagnation

During the May 1st holiday period, the 10Y nominal interest rate on US bonds fell by 19BP to 4.5%, and the 10Y real interest rate fell by 13BP to 2.15%, driving the 10Y inflation forecast to drop by 6BP to 2.35%. Prices of industrial metals such as copper and aluminum fluctuated weakly, and the gold price range fluctuated. Price fluctuations intensified after the release of non-agricultural data. There were many global macro data and meetings this week, and the final impact of relevant information on prices was quite moderate. Although the US ISM manufacturing and non-manufacturing PMIs both fell below the boom and bust line in April, Guojin Securities believes that the US economy is currently resilient, the job market remains healthy, and concerns about inflation still exist. Based on the GDP segment data for the first quarter, the US economy has not yet reached a state of stagflation. The inflation logic continues, and the price of precious metals and industrial metals continues to operate closely in the same direction.

Risk warning: The Federal Reserve's monetary policy was further tightened, domestic copper and aluminum deposits fell short of expectations, and the domestic support policy for the second half of the year fell short of expectations.