What happened: the recent escalation of the conflict between Russia and Ukraine, stubbornly high overseas inflation and a rising trend in gold prices. The spot gold price in London rose from a peak of US $1797 / oz in early February 2022 to US $1914 / oz, and closed at US $1898 / oz on February 22, up 6 per cent over the period.
The four correlation indicators play an important role in guiding the price of gold. In the "Construction of strong correlation indicators, leading large Gold Investment-Gold Industry depth report", we point out that the commodity attribute of gold is not the main determinant of gold price, and put forward four major correlation factors that affect gold price, among which gold ETF position and real interest rate expectation (TIPS) of US debt play a guiding role in short-term gold price, while Marshall K value and Fed total debt guide medium-and long-term gold price.
Short-term indicators: ETF positions in gold and expectations of real interest rates on US Treasuries guide short-term gold prices. 1) looking back from the historical data, the correlation between global gold ETF position and gold price is as high as 0.97. Considering the timeliness of data acquisition, the correlation between global gold ETF position and gold price is also as high as 0.94, which plays an important role in guiding the trend of short-term gold price. 2) there is a significant negative correlation between the gold price and the expected real interest rate of US debt, and the correlation coefficient between the gold price and the 5-year TIPS of US debt is-0.86.
Long-term indicators: the Marshall K value and the Fed's total debt guide the medium-and long-term gold price. 1) when the M2 growth rate of the broad money supply is higher than the GDP growth rate of the real economy, there is a "surplus" of money supply, and the decrease in the value of unit money makes the price of gold as a general equivalent rise. The correlation between the Marshall K value (M2/GDP) of the world's top five economies and the gold price in 1980-2020 has a certain guiding role in judging the inflection point of the gold price in advance. (2) Gold is essentially a hedging of US dollar credit. When the Fed's debt expands on a large scale, the price of gold is more likely to rise. The correlation coefficient between the two is 0.81 during the period from January 1, 2003 to February 16, 2022.
Zhaojin Mining, China Gold, Shandong Gold and Chifeng Gold are the ones with greater flexibility to the market capitalization of listed companies. We believe that the share prices of gold listed companies are ahead of the all-time high of Shanghai gold price, but basically Synchronize is at the stage high of Shanghai gold price. From the point of view of the market value elasticity of the gold price rise to the listed companies, H shares have the largest flexibility of Zhaojin Mining (7.94%), A shares are ranked first by China Gold (3.99%), Shandong Gold (3.14%) and Chifeng Gold (2.96%).
Investment advice: pay attention to the allocation value of gold plate. In the short term, the positions of the two major gold ETF are in the stage of increasing positions; in the long run, the year-on-year growth peak of the Marshall K value in the world's top five economies is about two years ahead of the gold price, while the year-on-year growth peak of the Marshall K value is in 2020, and the gold price peak is expected to occur in 2022. In the context of rising geopolitical risks, it is recommended to pay attention to the allocation value of the gold plate. From the perspective of market value elasticity, it is recommended to pay attention to Zhaojin Mining (H shares), China Gold, Shandong Gold, Chifeng Gold and so on.
Risk hints: (1) the risk of uncertainty in macroeconomic and liquidity; (2) the risk of failure of relevant indicators and leading indicators; (3) the risk of rapid exit of geopolitical risk events; and (4) the risk of inconsistency between gold stocks and gold prices.
