Huachuang Securities: Eased geopolitics and weakening employment data create a window for gold recovery.

Huachuang Securities released a research report stating that the recent weakening of short-term inflation and employment data has cooled the expectations for interest rate hikes, creating a recovery window for gold. Attention should be sustained on the U.S. non-farm payroll data on the 7th and the CPI data on the 12th for further verification of employment and inflation. The firm believes that the current central bank's gold purchases are gradually showing and strengthening their supportive effect on gold prices. The bottom position of gold is relatively clear now, with continuous valuation recovery expected, highlighting its medium- to long-term allocation value. It is recommended to pay attention to the gold sector and related assets, particularly industry leaders and clearly growth-oriented targets. Key points from Huachuang Securities are as follows: Events On August 4, according to the U.S. Bureau of Labor Statistics (BLS), the June JOLTs jobs openings decreased from a revised 7.54 million in May to 7.36 million, with an expected 7.4 million openings. On August 5, according to Hong Kong's Wind Information, the U.S. ADP employment figure for July increased by 44,000, expected to rise by 70,000, with the previous value revised from an increase of 98,000 to 95,000. In this context, U.S. Treasury Secretary Yellen stated in an interview that the U.S. might reach an agreement with Iran to open the Strait of Hormuz; Iranian Foreign Ministry spokesperson Baqaei stated on the 5th that they reached an agreement with Oman on shipping routes in the Strait of Hormuz. Furthermore, in the early hours of July 30, Beijing time, the Federal Reserve maintained the target range for the federal funds rate at 3.5%-3.75%. Additionally, the June core PCE price index was released, which showed that the U.S. June core PCE price index rose by 3.3% year-on-year, in line with expectations, with the previous value at 3.4%; month-on-month, it increased by 0.1%, compared to an expected 0.2%, and the earlier figure had risen by 0.3%. The firm believes that the weakening of short-term inflation and employment data has dampened interest rate hike expectations, creating a recovery window for gold. Firstly, the outcome of the July Federal Reserve meeting alleviated short-term rate hike expectations, leading to a decrease in expectations for a rate hike in September; secondly, regarding inflation data, considering the cooling on the U.S.-Iran conflict compared to the second quarter, along with the recent resurgence of negotiations between the U.S. and Iran, has controlled energy prices within a manageable range. The inflation data and employment figures for July and August indicate a cooling expectation for inflation, and with the U.S.-Iran conflict under control, inflation is likely to trend downwards; thirdly, regarding U.S. Treasury yields, the current 10-year and 30-year U.S. Treasury yields have broken through 4.6% and 5.1%, respectively. As of August 3, the total amount of U.S. Treasury debt has risen to $39.74 trillion, an increase of $1.32 trillion compared to the beginning of the year, which may exert some pressure on the expectations for rate hikes. The firm believes that attention should be sustained on the U.S. non-farm payroll data on the 7th and the CPI data on the 12th for further verification of employment and inflation. Global ETF funds are gradually entering a net inflow state, with gold investment demand expected to rebound. In June, global physical gold ETFs experienced outflows of approximately $8.9 billion; outflows were observed across all regions, with North America seeing the largest outflows. The total assets under management (AUM) of global gold ETFs decreased by 13% to $52.6 billion, with total holdings down by 74 tons to 4,047 tons. Despite the outflows in June, global gold ETFs maintained a net inflow trend in the first half of the year, with inflows of approximately $8 billion. However, since July, global gold ETFs have gradually entered a net inflow state. As of the latest data published by the World Gold Council on July 24, global gold ETF holdings amounted to 4,063 tons, an increase of 14.7 tons from the end of June, with a net inflow of 18.12 tons in a single week. According to Wind data, as of August 4, the SPDR Gold ETF held 32.45 million troy ounces, an increase of 73,000 troy ounces from the end of July and an increase of 135,700 troy ounces from the end of June. In the medium to long term, central bank gold purchases are forming a supportive floor, and the long-term logic of de-dollarization remains intact. In the first quarter of 2026, central banks purchased a total of 244 tons of gold, marking 22 consecutive quarters of net purchases. By country, 1) In June, China's central bank gold purchases hit a recent high: as of the end of June 2026, the reserves of China National Gold Group Gold Jewellery stood at 75.44 million ounces, an increase of 480,000 ounces from the end of May, achieving a new high for this round of accumulation, marking the 20th consecutive month of increases. As of Q1 2026, the proportion of gold in China's central bank's total foreign exchange reserves was 9.14%, compared to a global average of 28.2%, indicating that there is still room for growth in Chinas gold reserves. 2) The unconventional selling pressure from Turkey and Russia has somewhat eased; from March to April 2026, the gold selling pressure mainly came from Turkey and Russia, but sales from these two countries have shown signs of slowing in May and June. 3) Emerging economies still have room for gold allocation: according to the World Gold Council's survey published in June regarding global central bank gold reserves, the vast majority of surveyed central banks (89%) believe that global central bank gold reserves will increase in the next 12 months; the proportion of surveyed central banks that believe their own gold reserves will also increase in the next 12 months reached a record 45%. Notably, Poland, the world's largest gold buyer in 2025, plans to purchase 150 tons of gold in 2026, raising its total reserves to 700 tons. The Bank of Korea also plans to purchase gold for the first time in 13 years. According to reports from the JoongAng Ilbo and other South Korean media on August 3, the Bank of Korea plans to procure domestically refined gold bars for the first time in 13 years and has already purchased a small amount of gold ETFs in the second quarter. The firm believes that the current central bank gold purchases are gradually showing and strengthening their supportive effect on gold prices. Risk warnings: Federal Reserve policies may exceed hawkish expectations; geopolitical uncertainties; global central bank gold purchases may fall short of expectations; inflows into global gold ETFs may be less than expected.