CITIC Securities: Looking forward to a double-click on gold sector valuation and profitability at the bottom

CITIC Securities: Looking forward to a double-click on gold sector valuation and profitability at the bottom.

CITIC Securities pointed out that the price of gold and gold stocks have been seriously oversold since the conflict between the United States and Iran. Currently, gold stocks have a strong margin of safety in terms of PE and resource price comparisons.

The gold price is expected to operate in the range of 4,000-4,500 US dollars per ounce in the third quarter of 2026. If interest rate hike expectations are fully revised, the gold price is expected to return to 4,500-5,000 US dollars per ounce. The gold sector will benefit from the resonance repair of profit expectations and valuation levels.

Pay attention to the comprehensive allocation opportunities of the gold sector. Gold｜Looking forward to a double-click on gold sector valuation and profitability at the bottom Gold prices and gold stocks have been severely oversold since the conflict between the United States and Iran.

Currently, gold stocks have a strong margin of safety in terms of PE and resource price comparisons. We expect the gold price to operate in the range of 4,000-4,500 US dollars per ounce in 3Q26. If interest rate hike expectations are fully revised, the gold price is expected to return to 4,500-5,000 US dollars per ounce.

The gold sector will benefit from the resonance repair of profit expectations and valuation levels. Pay attention to the comprehensive allocation opportunities of the gold sector. ▍The price of gold and gold stocks have been severely oversold since the conflict between the United States and Iran.

Affected by the cooling of the Fed's easing expectations and the rising tightening expectations since the conflict between the United States and Iran, the maximum retracement of gold prices and domestic gold stocks from the highs of the year exceeded 25% and 50% respectively.

The decline in gold stocks was even more significant, due to the triple impact of shrinking valuations, stagnant profits, and a switch in market style:

1) The sector’s expected PE for 2026 shrank from 27.3 times at the end of January to 9.5 times at the end of June;

2) Since April, the trend of upward revisions of sector profit expectations has basically ended, and the profit expectations of some core targets have been revised downwards;

3) From the "924" market to January this year, the CITIC Gold Index and the ChiNext Index reversed to a strong positive correlation, which may reflect the diversified participation structure of gold stock investors.

However, since February, the two have reversed to a strong negative correlation again, which may reflect that the switch in market style has intensified the valuation contraction of gold stocks. ▍The interest rate hike trade is expected to be corrected, and we look forward to a rebound after gold prices stabilize.

Looking ahead, market expectations for interest rate hikes are expected to be revised:

1) In the short term, after the U.S. non-farm payrolls in June were significantly lower than expected and the previous value was significantly lowered, market expectations for interest rate hikes have eased. The subsequent ebbing impact of the World Cup is intertwined with structural factors such as low labor participation rates.

We recommend maintaining data observation for the downward trend in inflation and the elimination of employment disturbance factors;

2) In the medium term, based on historical conditions, current U.S. inflation (especially the expected inflation trend after oil prices fall) and employment data do not yet constitute sufficient conditions for an interest rate increase. We maintain the Federal Reserve’s judgment that the policy interest rate will remain unchanged during the year.

We believe that there is still room for downward revision of market interest rate expectations. It is recommended to pay attention to subsequent economic data and key event nodes such as FOMC meetings, annual meetings of global central bank governors, and mid-term elections.

Coupled with the unreversed "de-dollarization" trend and the central bank's gold purchase behavior, it is still expected that the gold price will be underpinned. We predict that the gold price in 3Q26 will range from 4,000 to 4,500 US dollars per ounce.

If interest rate hike expectations are fully revised, the gold price is expected to return to 4,500 to 5,000 US dollars per ounce. ▍The current PE and resource price valuations of the gold sector both demonstrate a strong margin of safety.

In terms of PE, historically the valuation level of the non-ferrous sector has been declining for a long time, but the gold sector has generally shown a premium compared to the copper sector.

According to Wind's consensus expectations, the PE of the reference copper sector has been running stably in the 10-20 times range for four years (currently 11.6 times), while the current PE of the gold sector has been reduced to 10.3 times in 2026, establishing an adequate safety margin in both absolute and relative levels.

In terms of resource price ratio (market value/equity resources), the upper and lower limits of the gold sector's valuation have a relatively stable "anchor" (the high point in January this year has been verified again). The current resource price ratio of many core targets has approached the historical lower limit.

The gold sector may be relatively resistant to the subsequent weak fluctuations in gold prices, and the marginal improvement in macro sentiment is expected to bring more significant rebound momentum.

The risk of the situation in the Middle East evolving beyond expectations; the risk of continued rising expectations for the Federal Reserve's interest rate hikes; the production growth of domestic gold mining companies being lower than expected; the cost growth of domestic gold mining companies being higher than expected; the operational risks of domestic gold mining companies' overseas assets; the risks of mine safety production and environmental protection.

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