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China Fund News reporter Tian Xin

As gold prices continue to rise, gold-themed products are favored by more and more funds.

Since July, the Class A RMB shares of E Fund Gold (LOF), which are currently under purchase restrictions, have warned of premium risks eight times. At the same time, domestically listed gold ETFs have also received considerable net subscriptions this year.

As for the future market, fund companies generally believe that in the medium and long term, the volatile upward trend of gold prices may be difficult to change, and the necessity of gold allocation will increase.

E Fund Gold Theme (LOF) warned of premium risk 8 times in July

On July 24, E Fund Management Co., Ltd. issued a premium risk warning announcement for its E Fund Gold Theme Fund (LOF), stating that the secondary market price of Class A RMB shares was significantly higher than the net value of the fund shares. On July 19, 2024, the net value of the fund shares was 0.993 yuan, and as of July 23, the closing price in the secondary market was 1.139 yuan. Investors are hereby reminded to pay attention to the premium risk of secondary market transaction prices. If investors buy at a high premium, they may face large losses.

Based on a rough estimate based on the above net value and secondary market price, the premium rate is close to 15%.

It is worth mentioning that this is the eighth time that the fund has issued a premium risk warning since July. According to the relevant announcement, the subscription and regular fixed-amount investment business of the Class A RMB shares of the fund have been suspended since April 25, 2024.

Industry insiders believe that the premium rates of QDII products of many ETFs or LOFs have been rising recently, greatly deviating from the net value of the funds, causing fund companies to frequently issue risk warning announcements. Generally speaking, high premiums often occur because the market is very optimistic about this direction, and because the QDII quota is limited and purchases are restricted, resulting in more buying than selling. Therefore, it is not recommended to chase high-premium products, and similar products with lower premium rates can be considered.

In recent times, the price of gold has continued to rise, and gold-themed funds have also risen.

According to Wind statistics, as of July 23, the average annual return of 26 gold-themed funds (only the main codes are counted) was about 15%. Among them, the net value increase of many domestically listed Shanghai Gold ETFs exceeded 16% this year.

Data shows that gold ETFs have been favored by funds since the beginning of this year. As of July 23, the total scale of 15 gold ETFs exceeded 50 billion yuan, an increase of more than 70% over the end of last year. Among them, the scale of many funds has more than doubled. Huaan Gold ETF and Bosera Gold ETF are already leading products with a scale of 10 billion yuan, with the latest scale reaching 23.626 billion yuan and 11.732 billion yuan respectively, and E Fund Gold ETF has also exceeded 8.8 billion yuan. From the perspective of fund share changes, fund shares have increased by more than 48% over the end of last year, which means that gold ETFs have received more than 15 billion yuan in net subscriptions this year.

The necessity of long-term gold allocation increases

Just last week, the price of gold hit a record high. As for the future market, fund companies generally believe that in the medium and long term, the tone of gold prices fluctuating upward may be difficult to change, and the necessity of gold allocation will increase.

GF Fund believes that due to the influence of short-term funding factors, the gold price has recently rebounded. In the medium and long term, the driving force supporting the rise in gold prices has not changed. More than 70% of central banks plan to increase gold reserves in the next 12 months, and China's strong demand provides long-term upward trend line strength for gold prices. On the other hand, the repeated expectations of the Fed's interest rate cuts have caused short-term gold prices to fluctuate, but due to the existence of the upward force of the trend line, the gold price is asymmetric to the expectations of interest rate cuts and interest rates, that is, when the expectations of interest rate cuts fall and the US Treasury bond interest rates rise, the gold price is limited; and when the expectations of interest rate cuts rise and the interest rates fall, the gold price will rebound sharply or even set a new high.

Xu Zhiyan, fund manager of Huaan Gold ETF, said that gold has significantly outperformed other major asset classes this year, mainly based on three factors: First, as inflation in the United States cools down, the Federal Reserve is expected to start a cycle of interest rate cuts in the second half of the year, and the impact of the overseas monetary environment on gold is relatively positive. Second, global central banks continue to buy gold, and the demand for gold is stronger than in previous years. Third, geopolitical conflicts continue, and gold has important allocation value against the background of increasing uncertainty in major asset classes. In the long run, the United States is currently facing the dual pressures of high debt and high interest rates, which will increase the US fiscal burden in the future and affect the credit of the US dollar. In response, the necessity of gold allocation is increasing.

Zhao Yunyang, manager of Bosera Gold ETF, said that in the third quarter of 2024, the geopolitical support for gold may be strengthened. The results of the European Parliament elections show that the dominance of right-wing forces is clearly increasing, casting a new shadow on the macro outlook of the euro zone and pushing up its safe-haven demand. At the same time, as the US election progresses further, subsequent gold assets may gradually shift from recessionary easing to re-inflation logic, and the upside odds of gold will be further expanded.

Editor: Captain

Audit: Wooden Fish

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