HTSC: Gold price rise still a high probability event, copper price short-term turning point may have appeared

According to the latest information from Zhitong Finance and Economics APP, Huatai Securities has released a research report stating that for different future economic scenarios in the United States, a continuous interest rate cut during a US economic downturn or economic stability followed by inflation is a high probability event, both of which are favorable for the rise in gold prices. The short-term turning point for copper prices may have already appeared. The rapid rise in copper prices in the first half of the year has suppressed downstream demand. In July, as copper prices fell, demand gradually recovered, and with supply still relatively tight, the negative sentiment in the market about a US recession has subsided following better-than-expected Q2 GDP data. Recent sporadic events may have a catalytic effect on the rise in gold and copper prices, such as the potential strike risk facing the Escondida copper mine with an annual production of over 1 million tons, and the ongoing developments in the Middle East region are also worth paying attention to.

Huatai Securities' main points are as follows:

For different economic scenarios in the United States, gold prices are likely to rise in the future

According to Wind data, US CPI, non-farm payrolls, job vacancies, etc., have gradually weakened, but GDP, service industry PMI, and other data still suggest that the current US economy has good resilience.

Huatai Securities believes that the US economy may weaken marginally, but as of July, there are no signs of a recession. The future development trends of the US economy may mainly fall into the following three scenarios: Economic trends downward with continuous interest rate cuts, strategic interest rate cuts due to stable US economy (but with the risk of re-inflation), and an upward trend in the US economy triggering a new round of inflation leading to rate hikes. The first two scenarios are favorable for the rise in gold prices, while the third scenario, compared to the current economic trend, is a low probability event and unfavorable for gold prices. As global multipolar trends evolve, central bank gold purchases will play a good supporting role in gold prices.

The short-term turning point for copper prices may have appeared, with supply still tight and demand returning

In the first half of 24, the market expected a slowdown in copper supply growth, with stable growth in the power grid and new energy demand, leading to a situation of supply shortage from 24 to 26; copper prices rose strongly in January-May under strong expectations. However, the market overlooked the sensitivity of downstream sectors to prices. According to SMM, as copper prices rose from January to May, domestic social inventories continued to accumulate; prices still suppressed demand, except for a year-on-year increase in domestic copper SMM terminal demand in January, the year-on-year growth from February to June was negative.

Huatai Securities believes that July-August 24 is the process of seeking the bottom for copper prices. The better-than-expected Q2 GDP in the United States to some extent dispelled the market's pessimistic expectations of trading a recession; with domestic copper prices falling below 80,000 in July, social inventories continued to decrease, indicating that demand is recovering. In addition, with the slight repair of copper smelting fees TC since mid-May, but still at a low level, it indicates that the supply side of refined copper is still relatively tight.

Recent sporadic events may become catalysts for the rise in gold and copper prices

According to market media reports on the 29th, Patricio Tapia, the chairman of the Escondida copper mine union, stated that workers will vote from Monday to Thursday. Prior to this, there were no reports on the union's stance on the contract proposal. If workers reject this deal, a strike may start immediately. According to the company's announcement, the mine plans to produce 1.08-1.18 million tons of copper in the 24 fiscal year. In addition, the tense situation in the Middle East region is worth monitoring. According to comprehensive market media reports, the Palestinian Islamic Resistance Movement (Hamas) issued a statement on July 31 confirming the assassination of Hamas political bureau chief Ismail Haniyeh in Iran Risk Warning: It takes time for domestic policies to transmit to fundamental improvements. There may be a deviation between commodity prices and stock prices, with stock prices rising while commodity prices fall, leading to a later correction. In addition, there may be risks of overseas economic downturn in the mid-term, with industrial prices potentially rising in the early stages of rate cuts, followed by a significant pullback as the economic downturn accelerates later on. When gold prices are excessively traded based on rate cuts and inflation expectations, a correction may also occur