Gold prices are still on an upward trend. We are optimistic about a bull market in nonferrous metals

After the National Day holiday, the non-ferrous metals sector has been on a roller coaster ride. Against the backdrop of gold prices hitting new highs one after another, how will the non-ferrous metals sector perform in the future?

On October 11th, Qin Jing, the co-chief analyst of metals and metal new materials at CITIC Securities, was a guest on The Paper's "Chief Connection" program, presenting her analysis and outlook.

Gold is still in an upward trend

For gold, both the spot and futures prices have now surpassed $4,000, Qin Jing stated that the increase in gold prices recorded this year is second only to the rise in gold prices driven by hyperinflation triggered by the oil crisis in the 1980s.

Overall, there are mainly three driving factors for the gold price this year: Firstly, it is driven by the clear expectation of the Federal Reserve cutting interest rates; Secondly, there is the safe-haven buying; Secondly, under the crisis of trust in the US dollar, major central banks have joined the sequence of purchasing gold.

From 2022 to 2024, global central banks increased their gold holdings by over 1,000 tons in a single year, a significant rise compared to the previous years when they only purchased 400 to 500 tons. Major central banks have voted with concrete actions against the single settlement system of the US dollar, accelerating the purchase of gold to enhance the credit of their own currencies and becoming the main force in purchasing gold. Qin Jing pointed out.

Looking ahead, Qin Jing stated that she still gives a positive assessment of the trend of gold's upward movement. As the global economic and trade landscape is undergoing an unprecedented reconstruction, the trade order is shifting from globalization to partial anti-globalization, and the dominance of a single currency is being replaced by a new balance that is diversified, decentralized, and anchored by physical credit. Against this backdrop, gold has great potential.

"During this restructuring process, it's hard to say that $4,000 is the peak of gold prices. Overall, gold still shows a bullish trend." " Qin Jing said.

Optimistic about the bull market of nonferrous metals

Regarding the performance of the non-ferrous metals sector in the A-share market, Qin Jing stated that the current sector is showing A "blossoming in all aspects" situation. Gold and copper prices have achieved "three consecutive gains" at the annual line level, and energy metal prices have also started to rise from the bottom. It can be said that the development of the nonferrous metals industry is currently experiencing a high prosperity cycle, which is closely related to the supply cycle, industrial structure upgrading, demand changes and the macro environment.

Qin Jing pointed out that since 2020, the nonferrous metals ETF has risen by 62.76% cumulatively. Except for a slight decline of 3.75% in 2023, it has recorded an increase in all other years. On the one hand, global liquidity is relatively abundant; More importantly, in the transformation of global economic and trade relations, many contradictions in the supply and demand of metals have emerged and are irreconcilable, and have even been elevated to the level of strategic metals. These supporting factors all have continuity. Therefore, I am optimistic about the bull market of nonferrous metals.

In terms of market rhythm, based on observations, the nonferrous metals sector is relatively likely to launch market movements in the fourth quarter and the first quarter of the following year. The main reasons are the year-end expectation calibration and the consumption drive during the peak season of the following year. Qin Jing said.

However, Qin Jing also emphasized that it is relatively difficult to accurately grasp the rhythm and amplitude of the color. Therefore, it is recommended that investors, under the background of accurately identifying industry trends, make slightly left-side position holdings. For instance, the current fluctuations in sectors caused by overseas disturbances will offer investors a great opportunity to get involved.

Be optimistic about the four main lines

In terms of configuration, Qin Jing suggests that investors pay attention to four investment clues in the non-ferrous metals sector.

First, precious metals. From the perspective of building a global diversified monetary system, central banks' gold purchases remain the major direction. As the gold price rises, the profits of the gold sector will be more outstanding, and the elasticity of silver will also emerge.

The second category is basic industrial metals such as copper, aluminum and tin. The main reason is that their supply is restricted, while they are supported by new consumption, such as electricity and semiconductors.

Thirdly, there are minor metals such as antimony, molybdenum, uranium, and rhenium. During the process of manufacturing upgrading, the qualitative change from iron materials to metallic materials cannot be achieved without the assistance of these metallic elements.

The fourth category is new metal materials, such as magnet materials and powder metallurgy materials, which should be selected based on AI applications.

When it comes to AI, Qin Jing suggests considering it from two aspects. The first aspect is the metals required for the construction of the underlying infrastructure that supports artificial intelligence. For instance, the power consumption of large models and computing power is very high. Therefore, it is necessary to expand the power supply installation and capacitor capacity that go with it, which will drive the demand for metals such as copper, aluminum, and uranium. The second level involves metals and new metal materials directly involved in the artificial intelligence process, such as small metals like tin and antimony, and ultrafine powder materials, etc.

In addition, Qin Jing further analyzed that under the rising trend of "anti-internal competition", it involves both old industries such as coal, steel and cement, as well as new industries like photovoltaic, lithium batteries and new energy vehicles. Specifically, in terms of metals, the reduction of steel production will continue to be advanced. In the non-ferrous metals sector, the main focus will be on the control of copper smelting capacity.

In the short term, the two sub-sectors mentioned above have been significantly boosted by policies. In the medium and long term, as the policies are effectively implemented, the industry structure will be optimized and industry profits will improve. This is not only conducive to enhancing the valuation of the corresponding sectors but also to boosting EPS (Editor's Note: earnings per share). Qin Jing pointed out.

Qin Jing pointed out that since non-ferrous metals are mostly priced in US dollars and consist of both financial and commodity attributes, overseas factors have a significant impact on both of these attributes. For instance, the Federal Reserve is in the midst of a new round of interest rate cut cycle, creating a weak US dollar environment. This is beneficial to the entire nonferrous metals sector at the pricing level. Among them, precious metals and copper have greater financial attribute pricing weights and are more sensitive to interest rates, thus having greater flexibility.

Under overseas disturbances, rare earths and minor metals also have good price elasticity. At the same time, as the economic aggregate and structure of overseas countries change, it will directly affect the consumption growth of varieties. For instance, the conductive and lightweight properties of copper and aluminum play a positive role in the energy transition process and fully benefit from the price-driven growth brought about by consumption." Qin Jing said.