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On July 6th, Goldman Sachs issued a research report stating that it is optimistic about the development prospects of Huahong Grace Semiconductor (01347.HK) and the growth in equipment demand. The report believes that the improved capabilities of various models in the market, including Meituan-Ws (03690.HK) newly released LongCat 2.0, will drive demand for AI chips and data center power management chips. At the same time, the popularization of generative AI will continue to drive related demand. Goldman Sachs is optimistic that Huahong will continue to benefit from rising AI demand and maintains its "Buy" rating, significantly raising its target price from HK$174 to HK$333. Goldman Sachs expects Huahongs new 12-inch capacity to continue to increase, and its product portfolio to upgrade to 40nm and 28nm. The report raises its net profit forecasts for fiscal years 2027 to 2029 by 1% to 8%, and expects the companys operating profit margin to gradually increase from 1% in fiscal year 2026 to 4%, 8%, and 12% in fiscal years 2027, 2028, and 2029, respectively, reaching a normalized level of 14% and 17% in fiscal years 2030 and 2031.On July 6th, UBS released a research report stating that Lao Pu Gold (06181.HK) is supported by boutique upgrades, VIC services, and more frequent new product launches. Its brand strength, channel capabilities, and product positioning are mitigating the impact of the gold price correction. The bank believes that Lao Pu Golds stock is oversold, with potential catalysts including better-than-expected first-half financial results, VIC-related activities, and the opening of overseas stores in the second half of the year. The bank expects the companys revenue and net profit to grow by 93% and 118% year-on-year in the first half of this year, respectively. The banks base case forecast is that gold prices will recover in the second half of the year. Even if gold prices remain weak, the pressure on Lao Pu Golds same-store sales growth is expected to be offset by contributions from new stores. The bank slightly adjusted its earnings per share forecasts for the company from 2026 to 2028 by 0% to 2%, but lowered its target price from HK$930 to HK$650 based on a high base leading to slower medium-term growth and market competition, while maintaining a "buy" rating.Euro Stoxx 50 futures fell 0.16%, German DAX 30 futures fell 0.08%, and UK FTSE 100 futures fell 0.09%.Germanys manufacturing orders, adjusted for working days, rose 6.2% year-on-year in May, compared with 1.60% in the previous month.Germanys seasonally adjusted manufacturing orders rose 1.9% month-on-month in May, below the expected 1.5% and the previous reading of -3.80%.

Before the US PMI is released, the gold price is expected to rise beyond $1,740 per ounce

Daniel Rogers

Aug 23, 2022 14:48

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On the back of conflicting forecasts for US Purchasing Managers Index (PMI) data, the gold price (XAU/USD) is trying to break above $1,740.00. A new monthly low of $1,727.85 was recorded for the precious metal on Monday, but it has since rallied strongly. Given the lack of impetus in the upward trend, the gold price is likely to stay volatile. However, a pullback may be less profitable.

 

The consensus for the S&P Global Manufacturing PMI is 51.5, which is down from the prior reading of 52.2. When compared to its previous reading of 47.3, the Services PMI has room to grow.

 

The yellow metal has been supported by the disappointing early estimates of US Durable Goods Orders. From a previous release of 2%, the market expects the economic figures to sharply decrease to 0.5%. It's important to note that the most recent reading showed no change in underlying pricing pressures, which stood at 5.9%. So, we expect to see little change, if any, in the Durable Goods Orders numbers. Unfortunately, a precipitous drop in economic statistics portends a precipitous drop in demand.

 

The other thing that will be in the spotlight is Federal Reserve (Fed) chair Jerome Powell's remarks from the Jackson Hole Economic Symposium. US economic conditions and Fed Powell's direction on inflationary pressures and interest rates will be determined by him.

 

Gold prices on an hourly scale are looking to continue their recovery after breaking above the $1,729.44 61.8% Fibonacci retracement (set from the low of $1,680.91 on July 21 to the high of $1,807.93 on August 10). Gold has been testing the resistance of the 20-period Exponential Moving Average (EMA) around $1,738.00; a sustained move above this level would signal a change in trend toward the bullish side.

 

Furthermore, the Relative Strength Index (14), which had been negative in the 20.00-40.00 range, has moved into the bullish 40.00-60.00 zone, indicating that gold prices are currently not bearish.