According to a research report from China Post Securities, the robust performance of gold prices has led to strong overall earnings release in the gold sector. In Q1 2026, the price of London gold once surged above $5,500 per ounce, setting a new historical high. Although the price has since retreated, Shanghai gold has remained above 1,000 yuan per gram. The central bank's significant gold purchases during the price decline highlight the long-term allocation value of gold. Holdings of U.S. gold ETFs have declined as interest rates rose but have now stabilized above 1,030 metric tons, indicating that short-term selling pressure has subsided. The market awaits renewed buying from trading positions once interest rate conditions change. The main views of China Post Securities are as follows:
Gold sector performance was strong in 2025 and Q1 2026. Gold prices rose significantly in 2025, reaching a historical high in January 2026. Supported by strong gold prices, the overall performance of the gold sector has been favorable. In 2025, gold companies reported increases in both operating revenue and net profit attributable to shareholders. Companies with self-selected mining as their main revenue source saw profit growth exceeding revenue growth, such as Shanjin International, Sichuan Gold, Chifeng Gold, and Zijin Gold International. In contrast, companies with a higher proportion of smelting operations, such as Hunan Gold and Hengbang Shares, experienced profit growth that was either lower than or similar to their revenue growth.
In Q1 2026, the price of London gold once climbed above $5,500 per ounce, hitting a new record high. Although the price later declined, Shanghai gold has consistently stayed above 1,000 yuan per gram. In March 2026, conflicts in the Middle East led to a temporary tightening of global liquidity, and expectations for interest rate cuts were repeatedly delayed. Coupled with phased gold sales by some central banks, these factors contributed to significant price volatility. However, the People's Bank of China's substantial gold purchases during the price drop underscore the long-term allocation value of gold.
After the gold price adjustment, the People's Bank of China accelerated its gold purchases. In April 2026, the central bank continued to increase its gold reserves. This marks the 18th consecutive month of gold accumulation since the resumption of purchases in November 2024. As of April 2026, the People's Bank of China held a total of 2,321 metric tons of gold. Notably, during April, when gold prices experienced a significant adjustment (with London gold once falling below $4,100 per ounce), the People's Bank of China purchased over 8 metric tons of gold. In March 2026, amid escalating Middle East conflicts, the central bank bought nearly 5 metric tons of gold. Overall, with gold prices at relatively low levels, expectations for central bank support to stabilize the market remain strong.
U.S. debt pressures persist, and negative factors for trading positions have been largely priced in. With the potential appointment of a new Federal Reserve Chair, expectations for a policy mix of interest rate cuts and balance sheet reduction could further reduce demand for U.S. Treasuries, strengthening the substitution logic of gold for U.S. bonds. The U.S. government's deficit rate remains high, with an annualized rate still above 7% in Q1 2026. The situation in the Middle East may further increase fiscal expenditures, making it difficult to reduce the deficit rate in the short term amid high interest rates. Holdings of U.S. gold ETFs declined as interest rates rose but have now stabilized above 1,030 metric tons, suggesting that short-term selling pressure has eased. The market awaits renewed buying from trading positions once interest rate conditions change.
Risk warnings include stronger-than-expected U.S. economic growth and further delays in the Federal Reserve's interest rate cut cycle.
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