Guojin Securities: Unexpected ADP data and cooling rate hike expectations drive a strong breakout in gold prices, igniting the precious metals sector

　　Source: GF Securities 5th Hour

　　Recently, the precious metals sector has strongly led the gains and become one of the brightest themes in the August market.

　　In July, US ADP private sector added only 44 thousand jobs, significantly lower than market expectations of 70-75 thousand, and June figures were also revised downward, sending a clear signal of a cooling labor market. After the data release, US Treasury yields and the US dollar weakened in tandem, forcefully lifting gold prices from the valuation side. Since July 31, spot gold has risen more than 5.8% cumulatively, breaking through $4,300/ounce intraday on August 6. Weak employment data confirmed that Fed rate hike pressures are easing, providing a macro driver for gold's renewed rally.

　　The resumption of the global central bank gold buying trend, a loosening US dollar credit system, and the continued pattern of de-globalization together form a solid medium- and long-term bottom for gold prices. Previously, precious metals were suppressed by oil price spikes caused by US-Iran conflict and phase-based hawkish expectations, which led to gold price falling back from highs to around $4,000. However, the tightest liquidity phase has passed, and as forthcoming CPI and other data continue to fall, the macro shackles restraining valuation are being gradually removed.

　　1. US July ADP employment data surprise on the downside, further cooling rate hike expectations for September;

　　2. Spot gold broke through the key $4,300/ounce resistance, opening up technical upside space;

　　Significant risk of gold price correction; unexpectedly hawkish Fed monetary policy; mining production and project progress falling short of expectations; geopolitical and exchange rate volatility risk; rising resource tax and cost risk.

Editor: Zhu Henan