【英文】瑞信报告：中国黄金业报告：至今为止黄金仍旧黯淡 China Gold Sector Gold lacking lustre, for now（66P）

 Gold price—unlike other commodities or metals whose prices are driven by supply-demand  dynamics—actually drives gold supply, demand and costs, rather than the other way around.  When gold price increases, investment demand—a major component of gold demand— also  increases, as investors chase the rally in gold price (Figure 17). Gold miners are incentivised to  increase production in order to capture the high prices. With stronger gold price, exploration  expenditure also increases (Figure 18). On the other hand, when gold price falls, investors’  interests in the metal eases and weighs down gold demand volume. Gold miners have less  incentive to produce more, given the softening margins.

We forecast gold price to average at US$1,409/1,569/1,450 per oz in 2019E/2020E/2021E,  given the strong gold price momentum supported by several macroeconomic factors.  Gold price spike in through late 2Q19 and most part of 3Q19 surprised us, despite having  forecasted earlier this year gold price to rise. In the longer term, we believe uncertainties would  still be there. There have been more than 30 interest-cuts this year, including the Fed’s three  25 bp cuts in July, September and October. Also, the interest-rate swap markets have priced in over 50 additional cuts over next year. Monetary easing remains the major stance in most  economies. As a result, gold price sees support from increasing volume of negative yield bond  (~US$17 tn, at ~30% of investment-grade bonds), as opportunity cost for holding gold declines.

Our global strategist expects US rates to remain unchanged at 1.50-1.75% through the end of  next year. Downside risks remain, but a healthy labour market and strong consumer finances  should prevent a more worrisome downturn in growth. On the labour side, our global strategist  believes the resilient labour market should encourage FOMC to remain on hold.  Despite the labour and inflation data, we also need to keep an eye on factors including trade  war and Brexit. Recent developments surrounding the US-China trade war show signs of deescalating. Together with the progresses made on Brexit, we expect to see some downside  pressure on gold price in the short term.