China Galaxy Securities: Macroeconomic expectations and fundamentals weaken, metal prices significantly decline, gold asset advantages are obvious

According to the information from Zhitong Finance and Economics APP, Galaxy Securities of China released a research report stating that the US employment and economic data fell more than expected, especially the decline in US employment data triggered the "Sam Rule" recession conditions, intensifying market expectations of a US economic downturn. Under the "recession trade," prices of non-ferrous metal commodities plummeted. After the release of the US non-farm payroll data in July, the market's expectation of the probability of the Federal Reserve cutting interest rates three times this year increased by 20.8 percentage points to 96.7%, which may further drive down real interest rates and boost the price of gold. Looking back at history, during US recessions, gold has shown a clear advantage compared to other assets, suggesting a focus on relative opportunities in A-share gold leading stocks such as Shandong Gold (600547.SH). Key Points from Galaxy Securities of China: Galaxy Securities of China stated that the pace of domestic economic recovery has slowed down, with the cumulative year-on-year growth rate of industrial value added above designated size in China dropping to 5.40% in June. In July, the domestic manufacturing PMI in China fell to 49.4%, staying below the boom-bust line for three consecutive months. Influenced by changes in the domestic macroeconomic environment and the traditional off-season for downstream consumption, the demand for non-ferrous metal industry is declining marginally, with major non-ferrous metal varieties experiencing inventory accumulation and the industry's prosperity level falling from a high point. In the US, the ISM manufacturing index in July was lower than expected, marking the largest contraction in eight months; the US non-farm payroll data for July also fell significantly below expectations, with the unemployment rate rising unexpectedly to 4.3%. The unexpected decline in US employment and economic data, especially the decline in US employment data, triggered the "Sam Rule" recession conditions, leading to a significant drop in non-ferrous metal commodity prices under the "recession trade." During the July interest rate meeting, the Federal Reserve kept the federal funds target rate unchanged in the range of 5.25%-5.50%, in line with market expectations. However, in the meeting statement, the Fed acknowledged the slowdown in the US job market and further progress in lowering inflation, no longer mentioning "still closely monitoring inflation risks," but instead focusing on the risks faced by the dual mandate of employment and inflation, indicating that inflation is no longer an obstacle to rate cuts. Fed Chairman Powell stated after the meeting that rate cuts are imminent, with the Fed potentially cutting rates as early as September. In the US, non-farm payrolls added 114,000 jobs in July, below the expected 175,000 jobs; the job additions for June were revised down from 204,000 to 179,000, and for May from 218,000 to 216,000; the US unemployment rate in July was 4.3%, higher than the expected 4.1%. The significantly lower-than-expected non-farm data in July in the US set a record low for job additions in three and a half years, with the unemployment rate reaching its highest level in nearly three years, triggering the "Sam Rule" recession prediction based on the unemployment rate. The lower-than-expected July employment data in the US shifted market expectations for the US economy from a "soft landing" to a "hard landing." Previously, the continuous decline in US inflation had led to a market consensus on the Fed cutting rates in September. However, the unexpectedly sharp decline in US employment data this time has raised market expectations for more rate cuts by the Fed this year and larger rate cut magnitudes. After the release of the US non-farm payroll data in July, the market's expectation of the probability of the Federal Reserve cutting interest rates three times this year increased by 20.8 percentage points to 96.7%, which may further drive down real interest rates and boost the price of gold. Looking back at history, during the US recession, gold has shown significant advantages over other assets. In the NBER recession cycles since 1948, the win rate and return on gold prices have been much higher than US stocks and other major commodity assets. In NBER recession cycles, the win rate and return on A-share gold sector have also been better than A-share market index and other non-ferrous metal sub-sectors. With the expectation of intensified "recession trading" in the market, it is recommended to pay attention to leading A-share gold stocks such as Shandong Gold (600547.SH), Zhongjin Gold (600489.SH), Shandong Gold International (000975.SZ), Chifeng Gold (600988.SH), and Hunan Gold (002155.SZ) for relative opportunities. Risk Warning: Risks of sharp decline in non-ferrous metal prices; risks of domestic economic recovery falling short of expectations; risks of the Federal Reserve's interest rate cuts falling short of expectations; risks of downstream demand for non-ferrous metals falling short of expectations