Orient Securities released a research report stating that beyond the certainty of interest rate cuts, risks are also rising. The current gold rally that began last week differs significantly from the previous upward movements from January to April this year and earlier periods. The main gold price appreciation timeframe has shifted from the traditional Asian trading hours (9 AM to 3 PM) to US trading hours (10 PM to 12 AM), suggesting that the current gold rally may be dominated by US domestic institutional investors.

The firm analyzes from three perspectives: recession risks facing the US economy, volatility risks in the US stock market, and credit risks facing the Federal Reserve and the US dollar. They believe that with market expectations for rate cuts already fully priced in, the primary driving force for subsequent gold gains will come from rising risk assessment.

**Main Views from Orient Securities:**

**Investor Perspective on Fed Rate Cut Certainty** Some investors believe the increased certainty of a September Fed rate cut is the main reason for gold's rise. Based on Powell's speech on August 22, the September rate cut probability shown by the Fedwatch Tool, and recent trends in US 10-year and 30-year Treasury yields, most investors consider the increased certainty of a September Fed rate cut and the opening of subsequent rate cut space as the primary drivers of this gold rally.

**US Economic Risk Assessment** **Job Growth Slows, Unemployment Rises - US Recession Risk May Be More Severe** The US August seasonally adjusted non-farm payrolls released on September 5 showed an increase of 22,000, well below the expected 75,000. The unemployment rate of 4.3% met expectations but still rose slightly from the previous 4.2%. The firm believes that behind the seemingly moderate rise in US unemployment lies deeper economic weakness.

According to US Department of Labor data, the seasonally adjusted labor force participation rate declined from 62.6% in April to 62.3% in August, indicating that some workers permanently exited the job market and were therefore excluded from unemployment statistics, causing only a modest uptick in the unemployment rate. Without considering this factor, the US unemployment rate could rise further, making the recession risk facing the US economy more severe.

**US Stock Volatility Risk Assessment** **Dollar Liquidity Risk Emerges, US Bubble Concerns Continue to Rise** Following the passage of Trump's Make America Great Again Act in June, the US Treasury is continuously raising funds through Treasury bond issuance. Considering bond market interest rate conditions, Treasury Secretary Bessent indicated in early July that approximately $200 billion would be absorbed through overnight reverse repos.

The Fed's overnight reverse repo facility has significantly declined to $21 billion, down 99% from $2.55 trillion in 2022, reaching the lowest level since 2021. Behind the emerging dollar liquidity risk, market concerns about US valuation bubbles continue to rise. The current Buffett Indicator has reached a historical high of 2.1, approximately 2.9 times above the long-term average. Additionally, US stock market capitalization growth significantly exceeds M2 growth, indicating the market has assigned valuation premiums higher than economic fundamentals.

From valuation and liquidity perspectives, the firm believes US stocks may face volatility risks, and US institutional investors' hedging demand is expected to continue driving gold price increases.

**Dollar Credit Risk Assessment** **Trump's Influence Continues to Strengthen, Fed Independence Faces Scrutiny** On September 4, Trump's legal team submitted new documents to court providing new legal arguments for Trump's dismissal of Fed Governor Cook. Trump has previously engaged in repeated confrontations with Powell over rate cut issues, so Powell's unexpected dovish turn may indicate that Trump's sustained pressure on the Fed is gradually taking effect.

The firm believes dollar credibility stems from the Fed's data dependency and independence in decision-making. As Trump's influence over Fed chairman appointments, board member selections, and rate cut decisions continues to strengthen, Fed independence may face more serious scrutiny, dollar credit risk assessment may continue to rise, and gold prices are expected to maintain upward momentum.

**Investment Recommendations and Targets**

**Gold Sector:** Assuming costs remain unchanged, companies with self-owned gold mines may achieve greater profit elasticity during gold price uptrends, thereby maintaining sustained performance growth.

Recommend attention to Chifeng Gold (600988.SH, Buy rating). The company continues to increase exploration investment and survey efforts, strengthening resource security capabilities. Its Laos Sepon Gold-Copper Mine SND project, after exploration, is estimated to increase the company's controlled gold resources by 5.7% compared to end-2024, alleviating market concerns about the company's medium-term growth prospects.

Recommend attention to Zhuzhou Smelter Group (600961.SH, Buy rating). The acquired Kangjiawan Mine has relatively high associated gold and silver grades, with gold content around 3g/t. Technical renovation projects are currently underway, which are expected to further enhance gold reserves upon completion.

Other gold-related targets: Shandong Gold International (000975.SZ, Not Rated), Zhongjin Gold (600489.SH, Not Rated), among others.

**Risk Warnings** Macroeconomic growth slowdown; tariff and other factors affecting export demand and supply chain stability; raw material price volatility; changes in China-US relations.