China Merchants Securities released a research report that said that the current global inflation is high, major commodities have risen significantly, the market has spread to gold. Gold may gradually evolve from safe-haven demand to the risk of stagflation and the long bull brought about by the expected marginal relaxation of the Fed's monetary policy. Gold stocks have fully pulled back, with price-to-earnings ratios at their lowest level in the last 17 years. A shares strongly recommend Chifeng Gold, Shandong Gold, Yintai Gold, Zijin Mining, China Gold, etc.; Hong Kong stocks recommend China Gold International (3-4 times PE), Zhaojin Mining and so on.
Stagflation risk accumulation, gold allocation value highlights: high global inflation, superimposed by the Federal Reserve in the interest rate hike cycle, facing a greater risk of stagflation in the future, good gold prices. The current trend of higher inflation is global, which is due to the shortage of supply caused by the warming of demand and insufficient capital expenditure in the upstream under the background of carbon neutralization, which is directly reflected in the sharp rise in the price of commodities such as crude oil and metals. Geopolitical conflicts will also further strengthen global inflation. Russia is an important global exporter of crude oil, natural gas, nickel and wheat, and Ukraine is also an important grain exporter. The conflict itself will affect domestic production and exports. Subsequent sanctions from Europe, the United States and other economies will also hamper supply. Brent and WTI have now broken through the $100 mark, there is still the possibility of further upward, the world will face greater inflationary pressures.
Geopolitical risks, significant inflows of gold ETF: the haze of short-term war, gold as an important safe haven asset regained the favor of market funds. SPDR, the world's largest gold ETF fund, had net inflows of 42.09 and 11.56 tonnes in the first two months of this year, respectively.
Real interest rates have rebounded significantly from previous lows and upward pressure has been released: since the Fed intensified its tightening expectations this year, real interest rates have risen rapidly from-1 per cent to around-0.5 per cent, while expectations of a rate rise have eased somewhat in the minutes of the Fed's January meeting, which did not give information about a rate hike exceeding 25bp in March. In fact, real interest rates have shown an overall downward trend since the beginning of the century, from 2% to around 0% before the epidemic, with limited upside space in the future.
The substitution effect of digital currency is weakening: because of its encryption and trading convenience, digital currency has the characteristics of risk aversion and anti-inflation, diverting some of the funds invested in gold to a certain extent, and digital currency is under pressure in the context of global monetary policy tightening this year.
At present, gold companies generally have a full pullback and low valuations, and strongly recommend Chifeng Gold, Shandong Gold, Yintai Gold, Zijin Mining, Zhongjin Gold and so on. Hong Kong stocks: China Gold International (3Mel 4x PE), Zhaojin Mining, etc.
With the intensification of the border conflict between Russia and Ukraine, the greatest impact on the supply of non-ferrous metals is palladium, antimony, vanadium, sponge titanium, platinum, and so on. Russia accounts for more than 10% of the global supply. Followed by nickel, magnesium, aluminum, accounting for more than 5%.
Among the industrial metals listed in LME and SHFE, due to active trading and high price sensitivity, the potential risks of supply disruption are nickel, aluminum and zinc. Among them, aluminum and nickel have a greater direct impact. Aluminum and zinc have the greatest indirect impact through energy supply.
Russia's aluminum smelting and nickel mines accounted for 5.4% and 9.3% of the global supply in 2021, respectively. At present, the global stocks of aluminum and nickel are low, and the supply is expected to be tight or structurally tight in 2022. If the supply of aluminum and nickel in Russia is disrupted, it may bring price fluctuations.
Because Russia is an important source of natural gas and oil in Europe. Russia, in particular, supplies 40% of Europe's natural gas. Natural gas prices in Europe have risen sharply since the second half of last year due to the energy supply crisis, forcing European aluminum and zinc smelters to cut production. The global supply of refined zinc and primary aluminum in Europe accounted for 16% and 6.4% respectively in 2021. You can pay attention to the investment opportunities in related fields, such as antimony (Hunan gold), aluminum (Shenghuo shares, Yunnan Aluminum shares, China Aluminum Corporation, China Hongqiao, etc.), nickel (Shengtun Mining, Huayou Cobalt Industry, Greenmei, Zhongwei, Luoyang Molybdenum Industry, etc.).
Risk tips: higher-than-expected Fed interest rate hikes, geopolitical conflicts, etc.
