The gold-silver differentiation phase has begun, with gold-silver ratio expected to continue to rise; copper stocks continue to accumulate, demand remains weak, and it is difficult to outperform precious metals in the short term. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.
According to the Zhongyou Securities report, in the long run, the escalation of the US deficit rate, geopolitical disturbance, and the near-shoring of the US supply chain all lead to a continued logic of central bank gold purchasing, and the rhythm of interest rate cuts may accelerate in line with the weakening US employment situation. The gold market is expected to reopen in H2 2024. In the short term, the basic trade with Trump has basically ended, and it is still necessary to pay attention to the US economic data. One can continue to try to go long on the gold-silver ratio. On the other hand, the main variable affecting the future trend of copper prices is the subsequent circumstances of the US economy. Even if the expectation of interest rate cuts is sufficient and it declines too quickly, it may still be more harmful than beneficial for copper prices. Overall, copper is difficult to outperform precious metals in 2024H2.
The main opinions of Zhongyou Securities are as follows:
Precious metals: The gold-silver differentiation phase has begun, with gold-silver ratio expected to continue to rise.
Last week, the logic of gold-silver trading began to gradually differentiate, with silver significantly weaker than gold, and the gold-silver ratio expected to continue to rise. With the yen carry trade reversing in the middle of the week, gold and silver also saw a decline. However, after the US GDP and PCE data exceeded expectations, gold began a more resilient rebound, while silver remained weak. In terms of short-term perspective, the GDP and PCE data may theoretically reduce the possibility of a rate cut in September, but the market does not seem to have secondarily priced in the rate cut. From a longer-term perspective, gold is essentially a measure of inflation, and sluggish economic conditions are most favorable for gold. In the end, last week COMEX gold rose by 1.25%, while silver fell by 4.54%.
According to Zhongyou Securities, in the long run, the escalation of the US deficit rate, geopolitical disturbance, and the near-shoring of the US supply chain all lead to a continued logic of central bank gold purchasing, and the rhythm of interest rate cuts may accelerate in line with the weakening US employment situation. The gold market is expected to reopen in H2 2024. In the short term, the basic trade with Trump has basically ended, and it is still necessary to pay attention to the US economic data. One can continue to try to go long on the gold-silver ratio.
Copper: Accumulation of stocks continues, demand remains weak, and it is difficult to outperform precious metals in the short term.
Last week, LME copper prices fell by 2.34% and continued to decline. However, after the US GDP and PCE data exceeded expectations, copper prices showed some rebound. Last week, global visible copper inventories reduced by 18,528 tons, while the price continued to fall. Under these circumstances, willingness to receive shipments from downstream seems to have started to loosen. The main variable affecting the future trend of copper prices is the subsequent circumstances of the US economy. Even if the expectation of interest rate cuts is sufficient and it declines too quickly, it may still be more harmful than beneficial for copper prices. Overall, copper is difficult to outperform precious metals in 2024H2.
Tin: The decline in trade due to recession led to a sharp drop in tin prices, and the confirmation of the bottom support has accelerated the process of removing stocks.
Last week, tin prices fell sharply by 4.27%, leading to a decrease of 9.38%/8.80% in social inventories/futures inventories. LME inventories accumulated by 0.77%. The decline in tin prices is mainly affected by the global recession trading expectation, which reflects that if Trump comes to power, his anti-globalization policies will harm the economic prosperity. However, considering the current changes in the US election situation, the moderate growth of US June PCE may trade in a soft landing in the United States next week, and tin prices may stabilize and rebound. On the supply side, the expectation of a shortage of raw materials has not yet been transmitted to the smelting end, and the operating rate of smelters is still relatively high. In addition, the Yunnan shutdown and overhaul has not yet had a significant impact on production. On the demand side, the Philadelphia Semiconductor Index fell by 3.07%, and the prospect of demand recovery is uncertain. In the short term, the macroeconomic situation is still the dominant factor for tin prices.
Antimony: The central price of antimony is steadily rising.
Last week, antimony prices rose slightly by 0.31%, approaching 0.16 million yuan/ton. The quotation of large factories remained strong, mainly due to the untimely import of imported ore sources from Russia and Australia, and the temporary shutdown of domestic large factories. The market is optimistic about the supply expectations. On the demand side, the price war of the photovoltaic industry is stimulating demand growth. According to Zhongyou Securities' estimate, when the antimony price rises to 0.2 million, the corresponding sodium white antimonate price is around 0.12 million. Sodium white antimonate accounts for about 33% of the cost of photovoltaic glass, and the proportion of photovoltaic component costs is lower. Hence, continued photovoltaic demand is expected to help maintain high antimony prices over the next 1-2 years.
Aluminum: Aluminum prices remain weak. Under the support of cost, it is expected to fluctuate primarily.
Last week, the aluminum price fell by 2.94%, and social inventory slightly decreased compared to the previous week. As for supply, the domestic electrolytic aluminum operating capacity was around 43.37 million tons last week, and a small amount of resumption of production occurred in Sichuan recently. In addition, the abundant supply of electricity during the flood season has increased the resumption capacity of production within the province, and it is expected that the future domestic electrolytic aluminum operating capacity will remain slightly elevated.
In terms of demand, the atmosphere of the off-season for consumption is strong, and downstream aluminum operations remain weak. The willingness to place orders for terminals such as photovoltaics has increased, driving some industrial material companies to improve their operations. However, in sectors such as plate and strip, there are fewer new orders, and the operating rate remains weak. In terms of costs, according to the current spot price of aluminum of 19,000 yuan/ton, 14% of the operating capacity in China is already in a loss. Although the fundamentals are weak, there is still cost support. It is expected that the aluminum price will fluctuate weakly.
Investment advice: Recommend paying attention to Zhongjin Gold Corp., Ltd. (600489.SH), Zijin Mining Group (601899.SH), Inner Mongolia Xingye Silver&Tin Mining Co.,Ltd. (000426.SZ), Yunnan Tin Co.,Ltd. (000960.SZ), Lizhong Sitong Light Alloys Group Co.,Ltd. (300428.SZ), CGN Mining Co.,Ltd. (01164) and so on.
Risk warning: Major fluctuations in macroeconomic conditions, lower-than-expected demand, unexpected supply release, and project progress falling behind expectation.
