Huachuang Securities has released a report noting that short-term cooling inflation and employment data have reduced expectations of interest rate hikes, opening a recovery window for gold. The firm advises continued monitoring of the US nonfarm payrolls data on the 7th and the CPI figures on the 12th of this month for further validation of employment and inflation trends.
The brokerage believes that central bank gold purchases are increasingly providing a price floor for the precious metal. With a relatively clear bottom for gold prices, valuations are expected to recover sustainably, highlighting its medium-to-long-term investment value. The firm recommends focusing on the gold sector and related assets, particularly industry leaders and companies with clear growth potential.
Key Observations from Huachuang Securities
Event Update
On August 4, the US Bureau of Labor Statistics reported that June JOLTs job openings fell to 7.36 million, down from a revised 7.54 million in May, slightly below the expected 7.40 million. On August 5, Hong Kong-based Wind Information reported that US July ADP employment increased by 44,000, well below the expected 70,000 and a downward revision from the prior 98,000 (revised to 95,000). Against this backdrop, US Treasury Secretary Bessent stated in an interview that the US may reach an agreement with Iran to reopen the Strait of Hormuz. Meanwhile, Iranian Foreign Ministry spokesperson Baghaei confirmed on the 5th that an agreement had been reached with Oman on shipping routes through the Strait.
In the early hours of July 30 Beijing time, the Federal Reserve held the federal funds rate target range steady at 3.5%-3.75%. Additionally, the US June core PCE price index was released, rising 3.3% year-on-year (in line with expectations and down from 3.4% previously) and 0.1% month-on-month (below the 0.2% forecast and down from 0.3% previously).
Short-Term Inflation and Employment Data Weakening Drive Lower Rate Hike Expectations, Creating a Recovery Window for Gold
First, the July FOMC meeting has alleviated near-term rate hike expectations, reducing the likelihood of a September rate increase. Second, on the inflation front, the US-Iran conflict appears to have cooled compared to the second quarter, and ongoing negotiations between the two sides have kept energy prices within a manageable range. US inflation data for July and August, along with employment figures, suggest easing inflation expectations, and with the US-Iran situation under control, inflation is likely to trend downward. Third, regarding US Treasury yields, the 10-year and 30-year yields have already broken below 4.6% and 5.1%, respectively. As of August 3, total US national debt had risen to $39.74 trillion, an increase of $1.32 trillion since the start of the year, with debt pressures potentially capping rate hike expectations. The firm recommends focusing on this month's nonfarm payrolls data on the 7th and CPI data on the 12th for further validation of employment and inflation trends.
Global ETF Inflows Are Gradually Turning Positive, Signaling a Potential Rebound in Gold Investment Demand
In June, global physical gold ETFs saw outflows of approximately $8.9 billion, with all regions reporting outflows, led by North America. The total assets under management of global gold ETFs fell 13% to $526 billion, while total holdings dropped by 74 tonnes to 4,047 tonnes. Despite the June outflows, the first half of the year saw net inflows of roughly $8 billion. However, since July, global gold ETFs have been steadily moving into net inflow territory. As of the latest World Gold Council data on July 24, global gold ETF holdings stood at 4,063 tonnes, up 14.7 tonnes from the end of June, with a weekly net inflow of 18.12 tonnes. According to Wind data, as of August 4, SPDR Gold ETF holdings were 32.45 million troy ounces, up 73,000 troy ounces from the end of July and 135,700 troy ounces from the end of June.
Central Bank Gold Purchases Provide a Long-Term Floor, and the De-Dollarization Trend Remains Intact
In the first quarter of 2026, global central banks purchased a total of 244 tonnes of gold, marking the 22nd consecutive quarter of net purchases. By country: 1) China's central bank gold purchases hit a multi-year high in June: By the end of June 2026, China's gold reserves stood at 75.44 million troy ounces, an increase of 480,000 ounces from May, the largest single-month increase in the current buying cycle, extending the streak to 20 consecutive months. As of Q1 2026, gold accounted for 9.14% of the People's Bank of China's total foreign exchange reserves, well below the global average of 28.2%, suggesting ample room for further increases. 2) Unconventional selling pressure from Turkey and Russia has eased: The selling pressure in March-April 2026 primarily came from Turkey and Russia, but both countries have slowed their sales in May-June. 3) Emerging economies still have room for gold allocation: According to the World Gold Council's June 2026 Central Bank Gold Reserves Survey, the vast majority of respondent central banks (89%) expect global central bank gold reserves to increase over the next 12 months. A record 45% of respondents expect their own gold reserves to rise over the same period. Notably, Poland's central bank, the largest gold buyer in 2025, announced in January 2026 plans to purchase 150 tonnes of gold in 2026, aiming to increase its reserves to 700 tonnes. South Korea's central bank is also planning to buy gold for the first time in 13 years, with reports from South Korean media on August 3 indicating it will purchase domestic refined gold bars and has already bought small amounts of gold ETFs in the second quarter.
Huachuang Securities believes that the floor-supporting effect of central bank gold purchases on prices is becoming increasingly evident and strengthening.
Risk Factors
Federal Reserve policy may be more hawkish than anticipated; geopolitical uncertainties; lower-than-expected global central bank gold purchases; and weaker-than-expected inflows into global gold ETFs.
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