Minsheng Securities issued a research report that risk aversion is only part of gold, the opposite of gold always corresponds to the credit currency. At present, long-term inflation expectations in the United States are emerging, and at the same time, the share of US financial assets has reached an extreme level in history. With financial assets denominated in credit currencies no longer able to beat inflation, flocking to gold and inflation-fighting physical assets is becoming a new option. Gold may be the dominant choice in an overseas "inflationary recession". Gold-related beneficial targets include: Zhaojin Mining (01818), Chifeng Gold (600988.SH), Shandong Gold (600547.SH), Yintai Gold (000975.SZ); at the same time, combined with fund tracking deviation, tracking error and management scale and other factors, it is recommended to pay attention to: rich Shanghai Gold ETFs (518680), Huaan Gold ETF (518880).
The main points are as follows:
Risk aversion is not the whole problem of gold right now.
After the outbreak of the conflict between Russia and Ukraine, the dollar index and dollar-denominated gold rose at the same time, entering the more classic "risk aversion mode". According to the calculation of Minsheng Securities, it is found that at present, the sovereign currencies of major countries / regions are depreciating relative to gold, which already occurred before February 22: before the conflict between Russia and Ukraine was included in asset prices, gold denominated in major countries' sovereign currencies has exceeded the June 2, 2021 high, while yen-denominated gold has reached an all-time high. A similar situation occurred before and after the European debt crisis, when the dollar index and gold rose under safe-haven demand (2010-01-04 to 2010-06-30), but gold ushered in a more resilient period after the dollar weakened (2010-06-30 to 2011-08-22). What investors need to consider now is whether the real opportunity for gold is overshadowed by event exchanges.
The other side of gold: natural currency VS credit currency
Gold is not money naturally, but money is gold naturally. The relationship between real interest rate and gold is not absolutely stable, it is part of gold pricing: according to real interest rate = nominal interest rate-inflation, real interest rate is actually the real return of holding credit currency-related assets (gold itself has no interest). It can describe the opportunity cost of gold most of the time. But the opposite of gold always corresponds to credit currency. When investors have a crisis of confidence in gold-denominated credit currencies, gold brings the most flexible moments. In history, the collapse of monetary credit will be reflected in the sharp rise in the price of all physical assets, behind which is the sharp devaluation of the credit currency of the valuation unit. The most extreme examples are the sharp devaluation of the Deutschmark after World War II, the hyperinflation in Zimbabwe and the frantic issuance of legal currency by the national government during the period of the Republic of China. The less extreme example took place during American stagflation in the 1970s: the historic golden opportunity brought about by the collapse of the Bretton Woods system and supply shocks.
"vanishing inflation": physical asset inflation VS financial asset inflation
Inflation is essentially a monetary phenomenon, that is, the fact that money grows faster than potential output itself leads to inflation. However: the currencies of the world's major economies have been significantly overissued for a long time in the past, while the nominal prices of most physical assets are on a long-term downward trend, and inflation seems to have "disappeared". In theory, if all money is used to price physical assets, nominal prices could rise sharply even if there is an oversupply. The highly uneven distribution of money between physical and financial assets is the logic behind it: none of the nominal prices of major commodities has outpaced the growth of broad money after 2011, and most of them are even negative. The proportion of financial assets in the total national assets of the United States continues to reach an all-time high of 74.79%. But some hidden worries have emerged that the annualized yields on one-year local currency government bonds in the inflation-adjusted major economies (the United States, Japan and Europe) in 2004-2021 are much higher than those of local currency-denominated gold. In the past, the return on holding financial assets may have come more from the 40-pound-60 portfolio of stocks and bonds, that is, some of the money in the past has flowed into support for technological progress and support for the real economy, even if there is inflation, but this is also more conducive to the performance of stocks, thus absorbing more money to hold financial assets.
The Historical opportunity of Gold
When the following unprecedented supply shock, ten-year inflation expectations in the United States have reached an all-time high. In the face of high inflation expectations, the long-term real return on holding US national debt assets is already close to negative. At the same time, U. S. government debt has reached an all-time high. At this time, there are many obstacles because it is too "painful" to raise the real return of bondholders by raising real interest rates significantly, while equity financial assets also face the dilemma of high-level decline. The hidden worries of credit currencies represented by the US dollar are emerging, and a positive feedback mechanism for currencies rushing to gold and anti-inflationary physical assets may be taking shape in the future. Minsheng Securities calculates the gold price on the basis of global broad money / global gold reserves, then the ratio of this gold price to that of the World Bank in 2020 is still lower than that in 2011, and the most expensive gold price by this standard actually occurred in 1980, that is, the end of the third round of stagflation in the United States. Based on this, Minsheng Securities is more likely to have a gold price of more than $2203 / oz. Historically, the greatest flexibility of gold stocks in the United States in the 1970s is often after the long-term price center of gold has moved up again and again, and the performance of domestic gold stocks in 2002-2011 is also the same. According to the advantages of corporate resource endowment and profitability, combined with the relevant views of Minsheng Securities Research Institute's metal and materials team, gold-related beneficial targets include: Zhaojin Mining, Chifeng Gold, Shandong Gold, Yintai Gold; at the same time, combined with fund tracking deviation, tracking error and management scale and other factors, it is recommended to pay attention to: rich Shanghai Gold ETF (518680), Huaan Gold ETF (518880).
Risk hint: inflation is lower than expected, US economic growth is higher than expected, and performance is lower than expected.
