2023-11-29 09:42:00
Introduction: The rise in U.S. bond yields may be coming to an end and is expected to become a catalyst for rising gold prices.
On Tuesday, Fed Governors Waller and Bowman released dovish messages. The two-year U.S. Treasury yield fell more than 15 basis points during the session, and the U.S. dollar index fell to 103, its lowest level in three and a half months. Overnight COMEX December gold futures closed up $27.60, or 1.4%, at $2,040, rising for four consecutive days to a six-month high since mid-May. Today’s strong rise in gold is mainly due to two factors. First, unpredictable events in the macro situation have led to a rapid increase in market risk aversion; second, there is a counterattack by many parties, giving themselves the opportunity to leave the market by pulling up. Institutions believe that the rise in U.S. bond yields may be coming to an end and is expected to become a catalyst for rising gold prices.
Basic metals: There is no obvious price driver in the short term, and basic metals remain low and fluctuate.
1) Copper: Copper prices remained low and fluctuated during the week, and overseas macro markets were still in a bearish environment, but fundamentals supported copper prices. On the supply side, the country is in a period of high production and the import profit window has opened, with high growth expectations. On the demand side, the recycled copper market is sluggish due to the low price difference between refined and scrap. After copper prices stabilized, downstream demand improved, and the consumption of refined copper rods exceeded expectations. Spot inventories of electrolytic copper fell by 20,000 tons to 99,000 tons during the week.
2) Aluminum: Aluminum prices remained volatile during the week, and supply-side electrolytic aluminum companies maintained stable production. The current operating capacity is 42.98 million tons. Inner Mongolia plans to release new production capacity at the end of the month; demand-side aluminum rod and aluminum plate companies have different production reductions and resumptions. The month-on-month change in demand was small. Social stocks of aluminum ingots continued to accumulate in the early part of this week. As downstream production gradually resumed and destocked, social stocks of aluminum ingots increased slightly by 2,000 tons to 590,000 tons during the week.
Precious metals: Risk aversion continues to ferment, gold prices rise sharply
Supported by risk aversion, Comex gold prices continued to rebound to $1,993.1 per ounce. Previously, the United States released retail data for September. Retail sales in September increased by 0.7% month-on-month, which was lower than the previous revised value of +0.8%, but higher than the expected +0.3%. Strong retail sales data showed that consumer demand was better than expected, which may trigger market expectations for a rebound in inflation. Powell’s speech to the Economic Club of New York on Thursday did not rule out further interest rate hikes due to too good data, but also emphasized that risks and rising bond yields have tightened financial conditions. He also pointed out that rising bond yields may mean that more interest rates are not needed. After the speech, CME’s FedWatch tool showed that the market believes that there will be no interest rate hike in November and the probability of no interest rate hike in December has increased. The situation in the Middle East continues to ferment, and the Minister of Defense said that he will soon issue an order to launch an attack on the Gaza Strip. In addition, Iran stated that if the Israeli army continues to attack Gaza, other parties may join the war. The rising situation in the Middle East has catalyzed a surge in gold prices.
Minor metals: Shanghai and tin fluctuate, and short-term supply and demand drive is limited
Shanghai tin stockpiles totaled 377 tons, reversing the month-long trend of destocking. We believe that there are two main reasons for the reversal on the demand side. First, the reserve inventory of the gold and nine industries has increased, and the demand for silver ten reserves has declined without sustained positive feedback on demand; second, the tin price has continued to rise to a certain extent last week. This has dampened the willingness to purchase and replenish the inventory, resulting in overstocking. The supply-side drive is also bullish and short-term in the short term, and it is difficult to draw conclusions. In September, domestic refined tin output was 2.2% year-on-year. Although domestic imports from Myanmar’s Wa State tin mines in September were due to the stock of mineral processing in Myanmar’s Wa State and domestic inventories. The buffer, the impact on supply is still within the controllable range. After the technical transformation of Yinman Mining, a subsidiary of Industrial Silver Tin, tin mines gradually increased, so the core of the supply-side contradiction is still the length of the Wa State’s suspension of production. In the short term, the supply and demand drivers of tin prices are weak, and tin prices may still fluctuate in the range of 210,000-220,000 for some time.
(Source: Tianfeng Securities, Guojin Securities)
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