Guojin Securities: Gold's “fake rebound” rather than a reversal of the year-end target of 4,300-4,500 US dollars/ounce

The Zhitong Finance App learned that Guojin Securities released a research report saying that the rebound in gold and silver was the result of the collapse of technological momentum and the outward rotation of capital, not a confirmation of a new round of trending markets. Gold has yet to break through the downward channel, and improvements in central bank purchases, ETF inflows, and speculative positions are still limited. Gold is expected to fluctuate and recover in the second half of the year. The target range for the end of the year is 4,300-4,500 US dollars/oz.

Guojin Securities views the following:

1. It may be a “fake rebound”

Since July, there has been a sharp rotation of global equity assets. AI hardware stocks experienced a sharp retreat due to the emotional transmission effect of Korea's deleveraging and various markets' take-profit demands, and capital began to rotate to other sectors. In the US stock market, capital sells for half the cost to buy M7; in the Asia-Pacific market, capital sells KOSPI, Nikkei, and Science Innovation 50 to buy non-AI assets and Hengke.

Interestingly, gold and non-ferrous metals have also rebounded in the past two days. Since July 20, the gold spot has rebounded 2.6%, and the more elastic silver spot has rebounded 4.5%; the rebound in gold stocks has been more intense. The leading gold mining stocks Zijin Mining and Shandong Gold have risen 16.6% and 15.4% respectively during the same period.

Since March of this year, concerns about rising oil prices triggering expectations of interest rate hikes have been an important driver for the sharp pullback in gold and silver. Recently, however, the situation between the US and Iran has been repeated. Oil prices and interest rates on US bonds are rising. Why are gold and silver rebounding?

Some people think that gold has reached an inflection point, but we think it's too early to talk about a reversal. Previously, pharmaceuticals, commercial aerospace, high dividends, and agricultural products had all ushered in phased rotation. This was the result of the collapse of technological momentum and the outward rotation of capital, and the rebound in precious metals taking over the baton did not exceed expectations. From a technical perspective, gold has yet to clearly break through the downward channel from late April to now.

From a financial perspective, it is true that gold's momentum capital and liquidity-sensitive capital have rebounded. The size of the SPDR gold ETF, the world's largest gold ETF, rose from 999 tons on July 17 to 1008 tons on July 22. Speculative positions in Comex gold futures recently rebounded, rising to 194,000 on the week of July 4. As mentioned earlier, the clear inflection point for gold in the second half of this year requires seeing signs of the AI bubble restarting, interest rate cut expectations restarting, and US dollar credit concerns restarting, but none of the three are currently clear.

As to whether the AI bubble theory was restarted, after the rapid adjustment of hardware stocks, the market did begin to shift from discussing far insufficient demand to discussing return on investment and valuation constraints. However, overnight, after Google slightly raised the CY2026 capital expenditure plan to 1950-205 billion US dollars, there was a rebound after that, indicating that funding is still optimistic about AI fundamentals.

Therefore, it is necessary to pay close attention to the incremental information in next week's financial reports of other US cloud vendors (Microsoft and Meta after July 29, Amazon after July 30). The cloud vendor's overall capital expenditure plan is the winner or loser in deciding whether the technology hardware market can restart.

Regarding the restart of interest rate cut expectations, the impact of the recent rise in oil prices on expectations of interest rate hikes also seems to be weakening. Since June 30, the price of oil has rebounded 32% from a low level, the real interest rate on 10-year US bonds has risen by 15 bps, and the break-even inflation forecast for 10-year US bonds has risen by 6 bps, but the market's expectations for the number of interest rate hikes by the Federal Reserve in December have only risen from 1.1 to 1.3 times. Expectations of interest rate hikes have softened the rebound in oil prices, focusing more on reflecting medium- to long-term inflation expectations. Expectations of interest rate hikes may have passed the most hawkish stage, which has also catalyzed a sharp rebound in gold and silver to a certain extent.

2. What do you think of gold in the second half of the year?

Gold has allocation value in the second half of the year. The target for the end of the year is 4,300-4,500 US dollars/ounce. The more likely interpretation scenario is the recovery of the shock, and a new round of unilateral rise still needs a catalyst.

As the technology sector shifts from a one-sided rise to a high level of differentiation, capital allocation is expected to be more balanced between technology and gold; if subsequent inflationary pressure eases, expectations of the Fed's interest rate hike fall, and the pressure on gold from the US dollar and real interest rates will also ease. Under the benchmark scenario, the US dollar and real interest rates are likely to remain relatively high. The allocation value of gold is higher than the trend transaction value, making it more suitable for gradual deployment in a pullback.

Gold opens up more room for growth and requires strong catalysis.

First, the AI bubble theory is heating up. The probability of this scenario is medium. If the return on technology capital expenditure is questioned, combined with AI investment driving a marginal slowdown in economic growth and interest rate cuts are expected to pick up, rebalancing capital may strengthen the odds of gold.

Second, US dollar credit concerns are rising. This is a low-probability, high-odds scenario. If US fiscal, debt, or policy risks before the midterm elections once again trigger the market to reprice the safety of dollar assets, gold may usher in stronger safe-haven and reserve demand.

Overall, gold is suitable for balanced allocation with technology assets in the second half of the year, so it is not advisable to expect too high a short-term surge.

Risk Alerts

Capital expenditure of overseas cloud vendors fell short of expectations; oil prices and inflation expectations rose above expectations; and the degree of global leveraged capital removal exceeded expectations.