Guoyuan: Focus on changes in supply and demand structure; gold's long-term allocation value emerges.

Guoyuan released a research report stating that gold itself does not generate interest, and holding cost is an important factor in analyzing its allocation value. Central bank allocation demand remains, but the intensity of net buying is not continuously rising. Resource endowment ultimately needs to be reflected as profit through economically recoverable mining, sustained production, and cost control. Jewelry demand responds to prices and consumer budgets differently from investment demand. The bank recommends focusing on resource development capability, cost control, and project delivery. Guoyuan's main views are as follows: Rates and the US dollar have risen; gold pricing needs to focus on holding costs Gold itself does not generate interest, and holding cost is an important factor in analyzing its allocation value. As of October 23, 2026, the London spot gold closing price was US$3,995.38/oz, down 7.62% from the end of 2025; the US 10-year real Treasury yield was 2.66%, up 73 basis points from the end of 2025; the US dollar index was 101.7520, up 3.54% from the end of 2025. Both the US dollar and interest rates constituted constraints requiring attention at this stage, but gold is also affected by factors such as central bank allocation, investment funds, and risk appetite, and changes in the US dollar cannot be mechanically translated into gold price forecasts. In the first half of 2026, central banks' net purchases totaled 345.38 tonnes, down 16.52% from the same period in 2025. Central bank allocation demand remains, but the intensity of net buying is not continuously rising. Pricing analysis needs to further distinguish central bank net purchases, gold reserve stocks, and ETF investment demand, and observe their changes separately. Gold supply grew moderately; conversion of resources into output remains constrained In the first three quarters of 2026, mine gold supply was 2,929.87 tonnes, up 1.76% year on year; recycled gold supply was 1,008.71 tonnes, down 2.82% year on year; producer hedging was -57.14 tonnes, and total supply was 3,881.44 tonnes, down 0.06% year on year. Mine gold and recycled supply have different response mechanisms: mine output increases depend on construction and operation, while recycled supply is affected by holders' liquidation and recycling channels. Resource endowment ultimately needs to be reflected as profit through economically recoverable mining, sustained production, and cost control. Projects from exploration to construction, trial production, and stable operation involve multiple factors such as grade, recovery rate, capital investment, permitting conditions, and production organization. Jewelry demand under pressure; new ETF demand weak in the first half Jewelry demand responds to prices and consumer budgets differently from investment demand. In the first three quarters of 2026, quarterly jewelry demand totaled 982.94 tonnes, down 18.68% from 1,208.77 tonnes in the same period of 2025. In the first three quarters of 2026, technology demand was 247.91 tonnes, up 2.59% year on year, showing a different trend from the decline in jewelry demand over the same period. Identifiable investment demand was 1,279.56 tonnes, down 20.32% from 1,605.95 tonnes in the same period of 2025. ETF investment demand in the first, second, and third quarters was 62.4 tonnes, -47.3 tonnes, and 211.9 tonnes, respectively, totaling 227 tonnes, lower than 627.6 tonnes in the same period of 2025, indicating weak new ETF demand in the first three quarters. In September 2026, the global gold ETF average daily trading value rebounded to US$7.12 billion, still below the US$22.78 billion level at the beginning of the year. Trading value reflects transaction scale, and the direction of fund allocation still needs to be judged in combination with net inflows and changes in holdings. Investment recommendations Recommend focusing on resource development capability, cost control, and project delivery. For Zijin Mining Group, focus on global gold incremental output and merger and acquisition integration; for Hunan Gold Corporation, focus on self-produced mine recovery, antimony and tungsten operations, and restructuring progress; for Zhongjin Gold Corp., Ltd, focus on gold and copper mine operations and conversion of the Shaling project; for Shandong Gold Mining, focus on output recovery and domestic and overseas project construction. Evaluate profit elasticity in light of each company's mineral structure, equity basis, and capital expenditure, and review the degree of valuation alignment under changes in the gold price. Risk warnings Gold price fluctuations, allocation demand weaker than expected, mine safety and environmental protection and operational risks, project construction and merger and acquisition integration falling short of expectations, cost and exchange rate fluctuations, and overseas policy changes.