This year, gold prices have repeatedly hit historical highs, with gold companies in the industry chain and institutional participants behind them, all positioning themselves to seize this wave of dividends.

After a brief pullback, the gold market has once again welcomed a "highlight moment," with both international and domestic gold prices setting new historical records.

On May 20th, London spot gold closed at $2,425.97 per ounce, rising to a high of $2,450.1 per ounce during the session, setting a new historical high; the COMEX gold on the New York Mercantile Exchange continued its rebound, closing at $2,430.3 per ounce, with a session high of $2,454.2 per ounce, also setting a new historical high. In the domestic market, the Shanghai Gold Exchange's spot Au9999 rose to 578 yuan per gram during the session, also setting a historical high.

Previously, after the COMEX gold price reached a high of $2,448.8 per ounce on April 12th, it experienced a pullback, and after falling to $2,285.2 per ounce on May 3rd, it began to rebound gradually.

In the afternoon of May 20th in Beijing, with fewer willow catkins, the gold retail stores saw the gold prices on electronic screens rising from time to time, and gold sales were also very hot. A staff member at the Lao Miao gold shop in the Youtang Plaza of Chaoyangmen, Beijing, told Caijing that the investment gold bar was 588 yuan per gram, and the prices of these two have warmed up. During the conversation, another staff member at the shop said that the price of the investment gold bar had risen to 592 yuan per gram, and if purchased, it could be settled at 588 yuan per gram.

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The electronic screen of Luk Fook Jewelry showed that the selling price of the day's 999/999 gold (jewelry gold) was 743 yuan per gram, the selling price of the investment gold bar was 662 yuan per gram, and the recycling price was 560 yuan per gram. A staff member at the store told Caijing that the jewelry gold had increased by 4 yuan per gram compared to yesterday, and because it was "520," it was reduced by 52 yuan per gram, with a discounted price of 691 yuan per gram.

A staff member at the China Gold store told Caijing that investment gold bars ranging from 10 grams to 500 grams have been out of stock for more than two months, and it is still unknown when they will be available.

Behind this prosperity, the gold transaction volume has increased significantly. Data shows that the gold transaction volume of the Shanghai Gold Exchange in the first four months of this year increased by more than 70% year-on-year, and compared to the data of more than 50% in the first quarter, the growth rate has increased again.

In mid-April, as gold prices rose, the consumer market became very hot. "This year's gold prices rise by several yuan a day as if it's a joke." During the field visit on April 12th, a staff member at Chow Tai Fook told Caijing that the company's jewelry gold price was discounted to 666 yuan per gram, but it had to be added with a craftsmanship fee, with the craftsmanship fee for ancient method jewelry gold being 70 yuan per gram, and the craftsmanship fee for ordinary jewelry gold being 30 yuan per gram.That afternoon, the electronic screen in Chow Tai Fook's store displayed that the retail price for fine gold (jewelry, crafts category) was 736 yuan/gram, while the price for investment gold was 655 yuan/gram. The staff member informed Caijing that the store had gold bars of 100 grams and below available for immediate pickup, and the store would buy them back at the market price when customers wanted to sell later.

"There is only one 100-gram gold bar left in the store, and we don't have gold bars over 100 grams in stock; they would need to wait for about a week," a staff member at China Gold's store told Caijing, adding that the company would deliver 1000-gram gold bars to the store irregularly, either directly or by courier, and they were mostly 100-gram products. The specific day of delivery was uncertain, but all would be sold out on the day of delivery.

On that day, the electronic screen in China Gold's store showed that the retail price for investment gold bars was 581.6 yuan/gram, and the buyback price was 565.6 yuan/gram. The aforementioned staff member stated that the selling price of the gold bars was the same as the retail price, with no additional craftsmanship fee. "If you want to buy a gold bar, you need to pay the full amount first, and the gold bar will be reserved for customers who have paid in advance once it arrives."

The above store scenes are just a microcosm of the booming gold market sales. The escalation of geopolitical conflicts, the strengthening expectation of interest rate cuts by major central banks worldwide, and the continuous purchase of gold by many central banks have supported a significant increase in international gold prices, making gold one of the most attractive investment products.

Since 2024, international gold prices have repeatedly hit new highs. On May 20th, the closing price of spot gold in London had risen by more than 17% year-to-date, exceeding the 12.26% increase in 2023. Domestically, the price of spot Au9999 gold on the Shanghai Gold Exchange has risen by 18.64% year-to-date, surpassing the 16% increase in 2023.

Behind the rise in gold prices, the volume of gold transactions has significantly increased. Data from the China Gold Association shows that in 2023, the bilateral transaction volume of all gold varieties on the Shanghai Gold Exchange increased by 7.09% year-on-year to 415,000 tons, and the bilateral transaction volume of all gold varieties on the Shanghai Futures Exchange increased by 43.9% year-on-year to 1,242,000 tons.

This trend continues. In the first four months of 2024, the bilateral transaction volume of all gold varieties on the Shanghai Gold Exchange was 209,000 tons, a year-on-year increase of 42.48%, with a bilateral transaction value of 10.61 trillion yuan, a year-on-year increase of 70.35%.

With the rise in gold prices, gold-related listed companies have become the new favorites of capital. Data from Wind shows that from the beginning of 2023 to May 20, 2024, among 12 gold production companies (gold production enterprises under the precious metal category, the same below), 9 companies' stock prices increased by more than 10%, and 6 companies' stock prices increased by more than 50%. During the same period, among 8 gold jewelry retail companies, 2 companies' stock prices increased by more than 50%.

The significant increase in stock prices is based on good performance. Benefiting from the rise in gold prices, the performance of many gold production companies has continued to grow: four companies' net profit attributable to the parent company in 2023 increased by more than 50%; in the first quarter of 2024, six companies' net profit attributable to the parent company increased by more than 50%, and three companies' growth rate exceeded 100%, far surpassing the data from 2023.

In the upward cycle, as a major gold-producing country, China's production capacity has begun to recover continuously. In 2023, China's total gold production increased from 499 tons in the previous year to 519 tons, and in the first quarter of 2024, the national total gold production increased by 21.16% year-on-year. Increasing investment in gold layout and expanding production have become the main strategies for China's gold production enterprises at present.Regarding the future trend of gold prices, some enterprises are quite optimistic. A person related to a listed company producing gold told "Finance and Economics" that under the general environment of slow growth in production and strong market demand, they remain optimistic about the trend of gold prices in 2024.

International investment banks have started to raise their target prices for gold. Goldman Sachs recently said in a report that the main driving factors behind the rise in gold prices this year have been the significant increase in holdings by emerging market central banks and the notable acceleration of retail buying in Asia. They have raised their year-end target price for gold from the previous $2,300 per ounce to $2,700 per ounce. Bank of America expects the price of gold to rise to $3,000 per ounce by 2025.

The continuous rise in gold prices has raised regulatory concerns about risks. The Shanghai Gold Exchange has warned its members to enhance their awareness of risk prevention, control positions reasonably, and invest rationally. Since April 15, the Shanghai Gold Exchange has adjusted the margin ratio for contracts such as Au (T+D) from 8% to 9%; the margin for the CAu99.99 contract has been adjusted from 45,000 yuan per hand to 51,000 yuan per hand.

Capital Layout

Benefiting from the repeated record highs in gold prices, the stocks of gold-related listed companies have continued to rise since 2023, becoming a bright spot in the A-share market. The rise in stock prices has also made the social security funds and insurance funds, which heavily increased their positions in this sector in 2023, the beneficiaries.

Wang data shows that from the beginning of 2023 to May 20, 2024, among gold production companies, the stock price of Sichuan Gold (001337.SZ) has nearly doubled, while the stock prices of Xiaocheng Technology (300139.SZ), Zijin Mining (601899.SH), Yintai Gold (000975.SZ), China Gold (600489.SH), and Shandong Gold (600547.SH) have increased by more than 60%.

The stock prices of gold jewelry retail companies have also soared. During this period, the stock price of Lao Feng Xiang (600612.SH) has increased by more than 80%, and the company's stock price set a historical high during the trading day on April 8, 2024; Caibai Shares (605599.SH) followed closely, with a stock price increase of more than 50%.

It is worth mentioning that the jewelry retail company Lesheng Tongling (603900.SH), which previously took advantage of the golden retail business and the rise in gold prices, saw its stock price continue to hit nine daily limit-ups since March 29, with a period increase of 136%. Subsequently, the company's stock price fell rapidly.

In this round of the rise in gold stocks, who are the winners? From the perspective of institutional holdings, social security funds and insurance funds have laid out in advance in 2023 and have significantly increased their positions in the gold sector.

According to incomplete statistics from "Finance and Economics," among the top ten shareholders of gold production companies in 2023, the National Social Security Fund 118 combination and the National Social Security Fund 112 combination have collectively increased their holdings in Chifeng Gold (600988.SH) by 7.19 million shares, the National Social Security Fund 502 combination has increased its holdings in Hunan Gold (002155.SZ) by 7.9 million shares and in Hengbang Shares (002237.SZ) by 7.21 million shares, the National Social Security Fund 112 combination and the National Social Security Fund 414 combination have collectively increased their holdings in Shandong Gold by 32.29 million shares, and the Social Security Fund 1102 combination has increased its holdings in China Gold by 19.78 million shares.During the same period, in terms of insurance funds, China Life Insurance increased its holdings in Chifeng Gold by 22.93 million shares through an insurance product, New China Life Insurance increased its holdings in Hengbang Shares by over 12 million shares through a group dividend insurance product, and New China Life Insurance increased its holdings in Yintai Gold by over 19 million shares through a general insurance product.

Entering 2024, with the rise in gold stock prices, the aforementioned social security funds and insurance funds have become winners.

Based on a rough estimate of the difference between the closing prices (not adjusted for rights) from the beginning of 2024 to the end of March and the closing prices for the 2023 period, the aforementioned social security funds saw a paper appreciation of over 270 million yuan from their increased holdings in 2023, and the insurance funds saw a paper appreciation of over 100 million yuan from their increased holdings.

In addition, some funds began to heavily invest in the gold sector in 2023. For example, among the top ten holdings of the Dongfang Cycle Selection Flexible Allocation Fund and the Huafu Yongxin Flexible Allocation Fund in 2023, more than seven stocks were related to gold companies.

In the first quarter of 2024, social security funds made minor adjustments to their positions in some gold-producing enterprises: the National Social Security Fund 112 combination and the National Social Security Fund 414 combination collectively reduced their holdings in Shandong Gold by nearly 3 million shares; the National Social Security Fund 112 combination reduced its holdings in Chifeng Gold by 5.25 million shares, while the National Social Security Fund 118 combination increased its holdings in the company by 350,000 shares; the National Social Security Fund 102 combination reduced its holdings in China Gold by 700,000 shares.

Entering 2024, as gold prices continue to rise, funds have begun to flow into the gold sector in large amounts. Wind data shows that from January 1, 2024, to May 20, 2024, the net inflow of funds into the Shenwan Gold Sector amounted to 5.7 billion yuan.

In terms of holdings through the Shanghai-Shenzhen-Hong Kong Stock Connect, Northbound capital began to gradually increase its holdings in the gold sector from late January 2024. On January 25, Northbound capital held 1.415 billion shares of Zijin Mining, and by May 8, this figure increased to 1.555 billion shares, with a net increase of 140 million shares.

During the same period, Northbound capital also significantly increased its holdings in stocks of gold-producing companies such as Shandong Gold and China Gold. However, it was also reducing its holdings in gold jewelry companies like Caibai Shares.

Some institutions and shareholders have chosen to reduce their holdings during the rise in gold prices and gold stocks. Wind data shows that among 12 gold-producing enterprises, the total holdings of the top ten shareholders in the first quarter of 2024 amounted to 25.6 billion shares, a decrease of about 1 billion shares compared to 26.6 billion shares in 2023.

Among them, except for Chifeng Gold, Hunan Gold, and China Gold, which saw an increase in this data, the data for the remaining companies has declined.Renowned investor Deng Xiaofeng, who had previously significantly increased his holdings in Zijin Mining, managed the GaoYi Xiaofeng No. 2 Equity Fund and the GaoYi Xiaofeng Hongyuan Collective Trust Plan, which respectively reduced their holdings in Zijin Mining by 49.5 million shares and 20 million shares in 2023. In the first quarter of 2024, the two aforementioned products collectively reduced their holdings in Zijin Mining by over 80 million shares.

There were also shareholders of gold-related companies who took the opportunity to reduce their stakes. For instance, Lesheng Tongling, which had nine consecutive daily price limit ups, saw its shareholder Ke Fu Rong Guang reduce its holdings by 3.45 million shares from April 3 to 11, 2024, through centralized competitive trading, cashing out over 28 million yuan.

Performance Surge

The rise in gold prices has also led to a general improvement in the performance of gold-related listed companies.

In the first quarter of 2024, among the 12 listed companies of gold-producing enterprises, 11 companies saw year-on-year growth in net profit attributable to the parent company, with six companies experiencing an increase of more than 50%. Among them, Chifeng Gold and Xiaocheng Technology's net profit attributable to the parent company grew by 166% and 157% year-on-year, respectively, significantly outpacing the performance growth rate of 2023.

Chifeng Gold stated in its first-quarter report that the increase in gold product sales and prices, along with effective cost control, were the main reasons for the company's performance growth. Shandong Gold, which saw a year-on-year increase of more than 50% in net profit attributable to the parent company in the first quarter, indicated in its previous performance forecast that the continued upward trend of gold prices in the first quarter of 2024 and the acquisition of Yintai Gold had a positive impact on the company's profit increase.

In the first quarter of 2024, Zijin Mining achieved a year-on-year increase of 15.05% in net profit attributable to the parent company to 6.3 billion yuan, despite a slight decline in operating income. During the quarter, the company's sales prices for gold ingots and gold concentrates were 472.74 yuan/gram and 436.66 yuan/gram, respectively, with year-on-year growth rates of approximately 15% and 19%.

In the same period, Shandong Gold's operating income increased by 45% year-on-year, and its net profit attributable to the parent company increased by 59% to 700 million yuan.

In 2023, the performance of listed companies in the gold sector had already shown a general increase. During that period, more than 70% of the listed companies in the gold-producing enterprises saw year-on-year growth in net profit attributable to the parent company, with Shandong Gold, Chifeng Gold, and China Gold among four companies experiencing a growth rate of more than 50%, with Shandong Gold's growth rate exceeding 80%.

Year-on-year growth rate of net profit attributable to the parent company of some companies in the A-share gold sector in recent years (%):

(Note: The original text does not provide the actual data for the recent years' growth rates, so this part of the translation is a placeholder indicating that such data should be included if available.)Leading A-share mining company Zijin Mining saw its operating income grow by 8.54% to 293.4 billion yuan in 2023, with a net profit attributable to the parent company increasing by 5.38% to 21.1 billion yuan. Benefiting from the rise in gold prices, the company's revenue from gold mining operations increased by 20.84% to 27.1 billion yuan in 2023, making it the second-fastest growing product revenue for the period and one of the main contributors to the company's performance growth.

During the same period, the unit prices of gold ingots and gold concentrates produced by Zijin Mining increased by 12.28% and 6.76% year-on-year, respectively. With the increase in sales volume of gold ingots, the company's revenue from gold ingots increased from 10.5 billion yuan in the previous year to 14.6 billion yuan. Although there was a slight decline in the sales volume of gold concentrates, the increase in prices still led to growth in revenue for this product segment.

Zijin Mining's Zijin brand gold ingots are registered for delivery at the Shanghai Gold Exchange and the Shanghai Futures Exchange, and Zijin Mining Group's gold smelting company is a qualified gold deliverer of the London Bullion Market Association.

In the 2023 annual report, Zijin Mining's chairman Chen Jinghe stated that in the face of global uncertainty and currency overflow, gold is the "ballast stone" of financial security, and its value preservation attribute is more prominent.

According to the annual report, Zijin Mining's gold production in 2023 was 68 tons, accounting for 23% of China's total gold production. At the same time, the company's gold reserves and resources were 1,148 tons and 2,998 tons, respectively, with equity reserves accounting for 37% of China's total reserves.

Looking at the data, the fastest-growing gold producer in terms of net profit in 2023 was Shandong Gold, with a 17.83% year-on-year increase in revenue and an 86.57% year-on-year increase in net profit attributable to the parent company to 2.3 billion yuan. On a quarterly basis, the company's net profit attributable to the parent company in the fourth quarter was 980 million yuan, far exceeding that of other quarters.

Among other gold production companies, Chifeng Gold, Yintai Gold, Hunan Gold, and Hengbang Shares all achieved year-on-year growth in net profit attributable to the parent company in 2023.

Chifeng Gold's gold mining gross profit margin increased by 8.05 percentage points to 35.69% year-on-year, which led the company to achieve a net profit attributable to the parent company growth of over 70% despite a revenue increase of less than 16%, and the net profit attributable to the parent company after deducting non-recurring gains doubled.

The rise in gold prices also led to a general increase in the performance of gold jewelry companies. In 2023, among the eight listed gold jewelry companies, six saw year-on-year growth in net profit attributable to the parent company, with three companies experiencing growth of over 50%. In the first quarter of 2024, five companies continued to see growth in this figure, but the growth rate has clearly slowed compared to 2023.

According to statistics from the China Gold Association, the national gold consumption in 2023 increased by 8.78% year-on-year, with gold jewelry sales increasing by 7.97% and gold bars and coins increasing by 15.7%. In the first quarter of 2024, the national gold consumption increased by 5.94% year-on-year, with gold jewelry sales decreasing by 3%, while gold bars and coins increased by 26.77%.In the view of the China Gold Association, the high gold prices in the first quarter have led to a polarization in the impact on gold consumption: the rapid rise in gold prices, coupled with high processing fees for gold jewelry and brand premiums, has intensified consumers' wait-and-see sentiment, increasing the sales pressure on gold jewelry retailers; in contrast, due to the surge in demand for risk aversion, physical gold investment has gained higher attention, and the consumption of gold bars and coins with relatively lower premiums has increased significantly.

Some gold sector companies have also experienced significant fluctuations in performance during this gold price rally. For instance, Western Gold (601069.SH) reported a net loss attributable to the parent company of over 200 million yuan in 2023, due to production suspension leading to a decline in the sales volume of self-produced gold and a drop in the sales price of electrolytic manganese metal. In the first quarter of 2024, however, the company's net profit attributable to the parent company exceeded 30 million yuan, as it sold self-produced gold from the previous year's inventory, with an increase in sales volume and sales price compared to the same period of the previous year.

Increasing Reserves and Expanding Production

As a major gold-producing country, after the continuous decline in China's raw gold production in 2020 and 2021, it began to gradually rebound since 2022. Increasing investment, expanding reserves, and expanding production have become the key words in China's gold industry at present. According to statistics from the China Gold Association, China's domestic raw gold production was 380.23 tons in 2019, ranking first in the world for 13 consecutive years.

With the rise in gold prices, China's gold production has also been gradually increasing. According to data from the China Gold Association, from 2022 to 2023, China's total gold production continued to grow. In 2023, China's total gold production increased from 498 tons of the previous year to 519 tons. Of this, the production of raw gold increased by about 3 tons, and the production of gold from imported raw materials increased by about 18 tons.

In the first quarter of 2024, China produced a total of 139.18 tons of gold, a year-on-year increase of 21.16%, of which domestic raw gold production increased by 1.16% year-on-year, and the production of gold from imported raw materials increased by 78% year-on-year.

Large gold enterprises (groups) are the main force in the production of gold mineral resources in China. During the same period, the domestic mine gold production of large gold enterprises (groups) was 32.01 tons, accounting for 53.18% of the national total, which is further increased compared to the 47.88% share in 2023. Companies such as Zijin Mining, Shandong Gold, and Chifeng Gold achieved a mine gold production of 16.34 tons from their overseas mines, a year-on-year increase of 13.5%.

To steadily advance the construction of a gold mineral resource security system, the Chinese gold industry implemented a new round of strategic actions for mining breakthroughs in 2023, and at the same time, accelerated the increase in reserves and production through resource mergers and acquisitions. The Xiling gold deposit in Laizhou, Shandong, has become the largest single gold deposit discovered in China, belonging to a world-class giant single gold deposit. Preliminary identification indicates that the gold deposit has added nearly 200 tons of gold metal, with a cumulative gold metal of 580 tons.

At the enterprise level, companies such as Shandong Gold, Zijin Mining, and Shandong Zhaojin have actively laid out high-quality resources. They have integrated resources for several gold and copper mine projects, such as the Xihu and Daqiao gold mines in Gansu, the Zhunuo copper mine in Tibet, and the Beishan gold mine in Dunhuang, Gansu, through mergers and acquisitions and bidding, achieving an increase in reserves.

It is worth noting that in 2023, Shandong Gold acquired a controlling stake of 20.93% in Yintai Gold through an agreement acquisition for 12.8 billion yuan, and increased its holdings in Yintai Gold to 28.89% in the secondary market.Coincidentally, in 2023, China International Gold Corporation Limited (CICC Gold) acquired 100% equity of Laizhou CICC and the debt owed by Gold Group to Laizhou CICC for a price of 4.9 billion yuan. Data shows that Laizhou CICC holds 44% equity of Laizhou Huijin, which in turn holds the mining rights of the Sha Ling Gold Mine.

Expansion has also become a key strategy for Chinese gold production enterprises.

Zijin Mining, which ranks among the top in the world in terms of gold resources and production capacity, saw a year-on-year increase of 21% in the production of gold ore to 68 tons in 2023.

Shandong Gold is also expanding its capacity and increasing production. In 2023, the company's Xihe Zhongbao, Jinzhou Company, and San Shan Island Gold Mine saw year-on-year increases in production of 15.54%, 10.73%, and 5.74%, respectively.

Several gold production companies are expected to increase gold production in 2024.

The annual report indicates that Zijin Mining's production of gold ore is expected to increase to 74 tons and 90 tons in 2024 and 2025, respectively. Shandong Gold's confirmed gold production plan for 2024 is not less than 47 tons, with the company's gold ore production in 2023 being 42 tons. Hunan Gold plans a gold production of 49.7 tons in 2024, which continues to grow compared to 2023.

Zijin Mining stated in its 2023 report that looking forward to 2024, the Federal Reserve's monetary policy is likely to shift towards easing. Historically, gold has performed strongly during the Fed's rate-cutting cycles. The uncertainty surrounding the speed and magnitude of the Fed's rate cuts could cause "swinging" in gold prices.

Regarding the subsequent trend of gold, some institutions still hold an optimistic attitude. Cui Lei, the fund manager of Nanfang Zhongzheng Shenwan Nonferrous Metals ETF, said that since 2023, the interest rate differential logic has replaced the opportunity cost as the new main pricing line for gold. The future start of interest rate cuts, combined with constraints on gold supply, is expected to drive gold to fluctuate at high levels. "It is expected that gold and industrial metal sub-sectors are likely to rise, while the energy metal sector may remain flat in the short term."

Some institutions also warn of short-term risks. Guosheng Securities stated that gold has a risk of short-term correction, but overall it remains bullish for the year. "According to historical experience, gold often undergoes a round of adjustment in the short term after breaking a new high, and the current position situation reflects that the long trade has become quite crowded."

Zijin Mining also said, "If the U.S. economic data continues to be strong, the possibility of the U.S. economy having a 'soft landing' or 'no landing' increases, which may limit the upward space for gold prices."