Guotai Haitong: Gold prices rebound, recommend related stocks in the gold and jewelry sector.

Guotai Haitong released a research report indicating that gold prices have rebounded, recommending gold and jewelry stocks that are likely to benefit from sales and profit elasticity. U.S. non-farm payroll data fell short of expectations, and the outlook for Federal Reserve interest rate hikes has weakened. London gold has seen a significant rise since August 5, currently breaking the $4,300 per ounce mark, reaching a new high since June 18. From the end of June to early August, it had consistently oscillated in the $4,000 to $4,200 per ounce range. The report notes that the previous suppression of jewelry sector stock prices was primarily due to the weakening of gold prices since Q2 2026, raising concerns about sales, gross margins, and sustainable growth against a higher base in the second half of the year. The current rebound in gold prices is expected to stimulate growth against a high baseline in the second half of the year, with leading companies enhancing their market share through superior products and driving operational leverage. A dual recovery of valuation and performance is anticipated. The report suggests that the gold jewelry sector can benefit from this round of rising gold prices in terms of both sales and profit elasticity. 1) In terms of volume, historical performance shows that gold prices are periodically correlated with industry growth rates, providing positive drivers in the medium to long term. Since 2024, the short-term spike in gold prices has negatively correlated with jewelry demand and positively correlated with investment demand; however, over the medium to long term, sustained increases in gold prices drive both jewelry and investment demand positively. From 2001 to 2012, industry growth rates fluctuated in tandem with gold prices, but the correlation weakened after 2013 due to a decline in wedding demand and other factors, with price increases since 2023 becoming the main contributor to industry growth. In terms of jewelry, fixed-price gold products benefit from a relatively stable pricing system, which is favorable for sales when gold prices rise in the short term. Therefore, the volume increase from the current gold price rebound mainly favors companies focused on fixed-price products or those primarily engaged in gold bar sales. 2) Regarding profit elasticity, business models determine the differences in the elasticity of gold prices on corporate gross margins. Companies with direct sales models, slow inventory turnover, high gold content by weight, and using a first-in, first-out inventory accounting method exhibit greater margin elasticity with rising gold prices. Risk warning: Significant fluctuations in gold prices, drastic changes in the stock and real estate markets squeezing gold consumer demand, poor management of franchisees, and intensified industry homogenization competition.