China has made it clear that countercyclical policy adjustments will be strengthened in 2025, which will benefit the recovery of the non-ferrous metals industry. The medium-term logic of rising gold prices has not changed.
The Zhitong Finance App learned that China Galaxy Securities released a research report saying that the Federal Reserve announced a 25BP interest rate cut at the FOMC meeting in December 2024. Interest rates on US bonds and the US dollar index rose sharply, suppressing the price of non-ferrous metals commodities. However, in combination with Trump's tax reduction policy plan, the size and deficit of the US government may expand at an accelerated pace in the future, triggering credit depreciation hedging transactions to stimulate a rise in gold prices. Currently, the domestic market is entering a low season for downstream construction, and industry sentiment is declining, while the domestic market clearly strengthens countercyclical adjustment in 2025, which is beneficial to the recovery of the non-ferrous metals industry. The medium-term logic of rising gold prices has not changed.
The main views of China Galaxy Securities are as follows:
The Federal Reserve cut interest rates hawkly, and interest rates on US bonds and the US dollar index rose sharply, suppressing the prices of non-ferrous metals commodities
The Federal Reserve announced an interest rate cut of 25 BP at the FOMC meeting in December 2024. After cutting interest rates, the interest rate level was 4.50%-4.25%, with a cumulative rate cut of 100 BP in 2024. Although the Federal Reserve cut interest rates as scheduled in December, and the overall rate cut in 2024 was in line with market expectations, on the December bitmap, the Fed gave guidelines to cut interest rates 2 times in 2025 and 2 times in 2026. The number of 2025 interest rate cut guidelines it gave was reduced compared to the September bitmap.
Meanwhile, at the press conference after the meeting, Federal Reserve Chairman Powell said that the Federal Reserve is at or close to slowing down interest rate cuts. The Federal Reserve gave a hawkish signal about the pace of subsequent interest rate cuts, which led to a marked recovery in US bond yields and the US dollar index, suppressing the prices of non-ferrous metals commodities.
The country clearly strengthens countercyclical policy adjustments in 2025, which is beneficial to the recovery of the non-ferrous metals industry
The December 2024 Politburo meeting and the Central Economic Work Conference emphasized the need to strengthen unconventional countercyclical adjustments in 2025, clearly stating that more active fiscal policies and moderately loose monetary policies should be implemented. Among them, the fiscal policy was changed from “active” to “more active,” which will raise the fiscal deficit rate, issue additional ultra-long-term special treasury bonds and local government special bonds, resolve local debt, and buy land reserves and stock housing; the monetary policy tone was adjusted from “steady” to “moderately loose” for the first time since 2011.
At the same time, the conference ranked “expanding domestic demand in all aspects” at the top of the nine key tasks, and proposed stronger support for “dual” projects. The domestic high-level meeting once again clearly revealed that positive macroeconomic policies will be strengthened in 2025, and macroeconomic expectations will rise, thereby improving the upstream copper and aluminum non-ferrous metal industry demand from downstream sectors such as real estate, construction, machinery and equipment, automobiles, and home appliances. Ample liquidity will also support the rise in non-ferrous metal commodity prices. This will also benefit the domestic nonferrous metals industry boom and the rise in the A-share nonferrous metals industry index.
Investment advice: The medium-term logic of the rise in gold prices has not changed
The overall valuation of the A-share gold sector has now reached the bottom of the past 5 years. The positive performance forecast for A-share gold stocks in 2024Q4 compared to the Q3 month-on-month increase, and the increase in the allocation value of the gold sector due to recent fluctuations in the A-share market are expected to drive a rebound in the A-share gold sector. It is recommended to focus on Shandong Gold (600547.SH), China Gold (600489.SH), Yintai Gold (000975.SZ), and Chifeng Gold (600988.SH).
Risk warning: 1) the risk of a sharp drop in non-ferrous metals prices; 2) the risk that domestic economic recovery falls short of expectations; 3) the risk that the Fed's interest rate cut falls short of expectations; 4) the risk of global geopolitical confrontation exceeding expectations; 5) the risk that downstream demand for non-ferrous metals falls short of expectations; 6) the risk that domestic policies will fall short of expectations.