Understanding the Market | Gold stocks rise across the board as Powell states that restrictive policies may be adjusted, and interest rate cut expectations may drive gold prices to new highs
Gold stocks rose across the board, with Zijin Mining up 3.58% and CHINAGOLDINTL up 3.24%. Powell stated at the Jackson Hole annual meeting that restrictive policies may be adjusted, with interest rate cut expectations rising to 90%. Guosheng Securities pointed out that the direction for interest rate cuts has been established, which may drive gold prices higher. UBS expects the upward trend in gold to continue until next year, raising the target price to USD 3,700 per ounce
According to Zhitong Finance APP, gold stocks rose across the board. As of the time of writing, Zijin Mining (02899) rose by 3.58%, trading at HKD 23.7; CHINAGOLDINTL (02099) rose by 3.24%, trading at HKD 87.6; Lingbao Gold (03330) rose by 1.92%, trading at HKD 11.16; Shandong Gold (01787) rose by 1.95%, trading at HKD 27.2.
On the news front, on the evening of August 22, Powell's tone at the Jackson Hole annual meeting clearly turned dovish, emphasizing the rising downside risks to employment and the shift in the balance of risks, which may require a policy adjustment. The Federal Reserve released a revised version of the "Statement on Longer-Run Goals and Monetary Policy Strategy," returning to a "flexible inflation targeting regime." After the meeting, traders raised their expectations for a rate cut by the Federal Reserve in September from 75% to 90%.
Guosheng Securities pointed out that the significantly revised employment figures on August 1 indicate that the U.S. policy rate remains in a restrictive range, and the direction for rate cuts has been established; the market's concerns about inflation limiting the Federal Reserve's rate cut path have been alleviated by Powell's remarks. Originally, the U.S. was under inflationary pressure, and a rate cut could further fuel inflation, pushing gold prices higher. The shadow Fed challenges the independence of the Federal Reserve, further enhancing the rate cut trade. Additionally, UBS expects that momentum from the U.S. will drive the gold rally to continue into next year, raising its gold price target for the end of June next year by USD 200 to USD 3,700 per ounce
