According to data released by the China Gold Association on January 27, the country's actual gold consumption in 2021 was 1120.90 tons, an increase of 36.53 percent over the same period in 2020 and 11.78 percent over the same period before the epidemic.
China is a big consumer of gold in the world. with the coming of the Spring Festival of the year of the Tiger, gift consumption represented by gold has also entered the peak season. Recently, the reporter saw in some gold jewelry shopping malls in Zhengzhou that the year of the Tiger gold banknotes, gold bars and different shapes of the year of the Tiger gold ornaments are placed in the most conspicuous position, attracting many consumers to buy. With the Spring Festival approaching, can gold consumption reach a peak? What kind of gold products sell well?
Gold consumption market heats up before Spring Festival
Recently, the reporter visited Zhengzhou Dennis, International Trade 360 and other shopping malls found that gold promotion activities are in full swing, of which the zodiac gold jewelry, wedding jewelry category sold more. "compared with last year, there has been a marked increase in sales of gold in shopping malls recently." A teller in Dennis, Zhengzhou Navigation Road, told reporters, "recently we have delayed getting off work until 23:00 in the evening."
At the mall, a middle-aged man is buying gold banknotes and the zodiac for the year of the Tiger for his two children. "there are one gram of gold banknotes and 500 yuan each. Issuing gold banknotes to children on the first day of the Lunar New year is more meaningful than handing out cash. This zodiac animal buys one for the child every year, and can collect 12 when he is 12 years old, which is also very meaningful for the child's growth. " The middle-aged man said.
Why do people like to buy gold?
"with the approach of the Spring Festival, the demand for gold has increased significantly. On the one hand, consumers have extra cash but cannot be used for optional consumption such as travel. Under the stimulation of New year promotion and other relevant measures, sales of physical gold jewelry have also increased steadily; on the other hand, in recent years, people's consumption concept is becoming more and more rational, and they are more willing to pursue consumption with both quality and performance-to-price ratio, and gold can better meet the needs of these people." Guangfa Futures Precious Metals researcher Ye Qianning said.
The reporter learned from the gold jewelry counter that ancient Fagin is very popular at present, especially bracelets and so on. However, now an ancient gold bracelet plus labor fee, get 16000 yuan (30 grams), the price is relatively expensive.
"in the past two years, more people have been married to buy ancient gold, which is, after all, the most popular process in the past two years." Dennis, a counter clerk said.
Gold demand mainly includes jewelry consumption, industrial consumption and investment demand. General jewelry consumption demand accounts for a relatively high proportion, while investment demand and industrial demand account for relatively small. According to data released by the China Gold Association, the country's actual gold consumption in 2021 was 1120.90 tons, an increase of 36.53 percent over the same period in 2020 and 11.78 percent higher than that in 2019 before the epidemic, of which gold jewelry consumption was 711.29 tons, an increase of 44.99 percent over the same period in 2020. "since 2021, with the gradual improvement of the domestic epidemic prevention and control situation, the consumer demand for gold has continued to release, and residents' demand for gold and silver jewelry has increased. As a traditional Chinese festival, the Spring Festival is approaching, all kinds of gold and silver jewelry have also entered the peak consumption season, and the demand for gold has increased. " Huizhou Merchants 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, and retail enterprises continue to carry out various forms of online marketing activities such as live webcast. Processing enterprises 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 worried about global economic growth, superimposed by the global COVID-19 epidemic, the conflict between Russia and Ukraine, as well as the Middle East issue, the Iranian nuclear issue, the Afghanistan issue, and so on. The market's demand for investment risk aversion to gold such as gold bars and coins has increased.
Is it appropriate for investors to buy gold now?
According to data released by the China Gold Association on January 27th, domestic raw material gold production in 2021 was 328.98 tons, down 36.36 tons from 2020 and 9.95% from the same period last year. Of this total, 258.09 tons of gold mineral gold and 70.89 tons of non-ferrous by-product gold were completed. In addition, imported raw materials produced 114.58 tons of gold in 2021, an increase of 0.37% over the same period last year. If this part of imported raw materials is added to produce gold, a total of 443.56 tons of gold will be produced in 2021, down 7.50% from the same period last year. "the main reason for the decline in domestic gold production in 2021 is the periodic suspension of production in two major gold production provinces, Shandong Province and Henan Province, which is the main reason for the decline in gold production in the whole country." From Shanshan.
Ye Qianning told reporters that the output of gold in China has declined for five years in a row. First, some mines are in nature reserves and need to be withdrawn according to law, but new production projects have not been produced. Second, after cyanide tailings and cyanide-containing wastewater treatment sludge produced in the process of gold mineral processing in 2021 were listed as hazardous wastes, environmental supervision continued to intensify, which had a greater impact on the production of small and medium-sized mines that did not meet the exemption conditions in the disposal process. Third, the cost for miners to apply for mining licenses is relatively high, which affects the production progress of new projects.
Compared with 2020, the closing price of Shanghai gold futures in 2021 fell by 5.16%, with an average closing price of 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.
According to Shanshan, the price of gold has adjusted sharply in recent trading days, and the current price has fallen back to the level at the beginning of 2021. As the global economy continues to recover in 2021, expectations of Fed policy tightening are gradually rising, the dollar index continues to strengthen, and precious metals stocks fluctuate and fall. At present, gold is still in a downward trend, and the main logic of market trading in 2022 is the Fed's pace of raising interest rates. judging from the results of the Federal Reserve policy meeting in January, the Fed has a hawkish attitude towards raising interest rates, and claims that it does not rule out raising interest rates at every FOMC meeting. in the face of the Fed's tough attitude of raising interest rates, US bond yields and the dollar index fluctuate upward and bearish gold prices. Therefore, gold may still oscillate weakly before the Fed's interest rate cut is expected to fall to the ground.
Wang Wenhu believes that as the central banks represented by the Federal Reserve gradually tighten monetary policy and the global COVID-19 epidemic gradually alleviates, the center of gravity of gold prices shows an oscillating downward trend. It is expected that gold prices will have the best buying point in the second and third quarters of 2022, when investors can buy gold and hold it for a long time.
"compared with the performance of gold in the last Fed rate hike + contraction cycle, due to the narrowing of the current tightening cycle, the short-term volatility to gold is expected to be relatively greater." Ye Qianning said that historically, market expectations were often overestimated at the initial stage of gestation. While there are still disturbances in the global epidemic, the main purpose of Fed tightening is to curb the persistence of high inflation. If later epidemic control is alleviated due to greater progress in epidemic control, or if hawkish interest rate hikes lead to signs of recession-like recession in the US economy again, the Fed may need to loosen monetary policy again. As a result, there is limited room for interest rates to continue to rise. Gold is generally undervalued after a correction in 2021 and has a long-term value to hedge against risk and inflation while the monetary policy of central banks around the world remains generally loose.
From historical experience, the price of gold will not continue to decline in the process of raising interest rates and shrinking the schedule of the Federal Reserve. Specifically, during the period from December 15, 2015 to September 20, 2017, the prices of COMEX gold and Shanghai gold futures rose 22.67% and 23.64% respectively. During the period from September 21, 2017 to December 18, 2018, when the Federal Reserve raised interest rates and contracted the table at the same time, the price of COMEX gold futures fell 4.79%, while the price of Shanghai gold futures rose 0.66%. During the period from December 19, 2018 to September 30, 2019, the price of COMEX gold and Shanghai gold futures rose 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 some pressure on the price of gold, the long-term trend of long-term interest rates on US debt is still dominated by economic growth expectations and may level out in the cycle of interest rate hikes and contractions. in turn, it will not put sustained pressure on the price of gold. Because at some stage of the future monetary tightening cycle, especially after the safe-haven funds accumulated during the COVID-19 epidemic gradually withdrew 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. the market demand for gold may be warmed up by the support of risk aversion and speculative positions, and the gold market may rise periodically.
Goldman Sachs: it's time to buy gold!
Goldman Sachs analyst Mikhail Sprogis and others said on January 26th that it was time to buy some defensive assets such as gold.
Goldman Sachs was a gold bull last year, but was eventually hit in the face by the market. Goldman Sachs thought gold would rise as high as $2000 an ounce, driven by a weak dollar and demand from emerging markets. But as developed economies grew better than emerging markets last year and expectations of inflation were temporary, gold fundamentals were weak and ended up falling 7 per cent for the whole of 2021.
This year, Goldman Sachs continued to be bullish on gold in its report, raising its price forecast to $2150 a tonne from $2000 a tonne. The reason is that the growth of developed economies, mainly in the US, is slowing and that high inflation will generate investment demand for gold. At the same time, the recovery of emerging market economies will generate consumer demand for gold.
In other words, Goldman Sachs believes that gold will become a defensive asset against high inflation this year.
Goldman Sachs points out that while both gold and bitcoin have the function of hedging against inflation, their logic is different. Gold is an inflation hedge against risk aversion (risk-off), while Bitcoin is an inflation hedge under risk sentiment (risk-on). As the Fed accelerates tightening to fight inflation, although the US economy is not yet in recession, Goldman Sachs expects a significant slowdown in US 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's rise.
Goldman Sachs believes that recession risk is a key barometer of investors' preference for gold. For example, with the recent rapid rise in real interest rates, gold's performance is very "flexible". This often happens at the end of the cycle, when demand for safe-haven assets begins to rise. Expectations of the probability of a US recession will be the core driver of gold ETF inflows. With the rapid economic growth and loose financial environment in 2021, the market is not worried about the risk of recession at all. By 2022, however, market expectations for the outlook for the US economy were deteriorating.
Goldman Sachs believes that the stabilization of the dollar and demand from emerging markets will also contribute to the rise in gold. As the market has roughly factored in the risk of multiple interest rate increases by the Fed, the dollar is expected to stabilize this year with slight downside risks. The receding of this "headwind" will lead to a rise in consumer demand for gold in emerging markets.
In addition, Goldman Sachs points out that gold is also the "ultimate hedge" against geopolitical conflicts. Gold becomes an effective hedging tool when geopolitical risks are serious enough to affect the US economy. Such as the "9 / 11" incident in 2001 and the war in Afghanistan in 2003. If geopolitical risks have little impact on the US, the rise in gold will be limited.
