TF Securities: Copper and gold will both benefit from loose liquidity in the long term

According to the information from Zhitong Finance APP, TF Securities released a research report pointing out that the pricing of gold mainly comes from financial attributes, while the pricing spectrum of copper is jointly formed by financial attributes and industrial attributes. In the long-term dimension, both copper and gold will benefit from loose liquidity. The difference lies in the fact that the industrial attribute pricing of copper depends on the level of economic prosperity based on fundamentals.

In terms of individual stocks, the resonance of the new and old paradigms supports the upward trend of the central price of gold. TF Securities continues to be optimistic about the performance of gold after the first interest rate cut and the value of the gold sector in the long term. It is recommended to pay attention to: Zhaojin Mining (01818), Zijin Mining (02899), Shandong Gold (01787), etc.

Furthermore, the pessimistic expectations for copper demand may have been anticipated in advance, and the downside space for copper prices in the year may be limited. In the medium to long term, the central price of copper is expected to steadily rise, and related companies are expected to benefit. It is recommended to pay attention to: Zijin Mining, Jinchengxin (603979.SH), China Nonferrous Mining (01258), etc.

The main points of TF Securities are as follows:

Historical rules: After the first interest rate cut, gold has a higher winning rate, and the copper price is a game of "soft landing" or "hard landing"

According to the results of historical review after the first interest rate cut:

1. Gold has a higher winning rate. We believe that this is mainly due to the repeated trading of recession under economic weakness, with the safe-haven property becoming the main driving force for the rise in gold prices (but also need to be vigilant against short-term trading stampedes caused by liquidity crises). In addition, after the weakening of recession trading, inflation trading may take over, which will continue to stimulate the rise in gold prices.

2. The copper price is a game of "soft landing" or "hard landing". In the short term, the expectation gap of the Fed's interest rate cut will have a certain impact on the copper price. In the medium term, the extent of demand recession may determine the trend of copper prices. In the case of a "soft landing" of the U.S. economy, the probability of copper price volatility or rise is higher; in the case of a "hard landing" of the U.S. economy facing severe recession, the possibility of copper price decline is greater. In the entire interest rate cut range, the 90th percentile cost line is still a strong cost support level. Generally, only in a few extreme risk events will the copper price fall below the 90th percentile C1 cost.

Outlook: Gold is still the preferred option for the year, and pessimistic expectations for copper demand may have been anticipated in advance

1) Gold price outlook: Gold is still the preferred option for the year. On the one hand, according to the results of historical review, the probability of gold rising within six months after the first interest rate cut is high, with the reinforcement of right-side interest rate trading, combined with the repeated recession trading and potential inflation trading, jointly stimulating the rise in gold prices. On the other hand, this round of gold price increase has new pricing factors. Under the expansion of liquidity and frequent geopolitical events, de-dollarization has become the underlying logic of gold pricing. The rise in gold prices is not only the result of interest rate cut speculation, but also the support of both old and new paradigms. Therefore, we continue to be optimistic about the performance of gold after the interest rate cut is implemented.

2) Copper price outlook: Pessimistic expectations for copper demand may have been anticipated in advance. Since March this year, copper prices have continued to rise, followed by repeated macroeconomic recession expectations and copper consumption pressure, leading to a significant decline in copper prices since June. We believe that the previous decline in copper prices may have already absorbed relatively pessimistic demand expectations. Recently, downstream consumption has grown under the pullback of copper prices, limiting the downside space for copper prices in the year Investment Advice: The pricing of gold mainly comes from its financial attributes, while the pricing spectrum of copper is jointly formed by financial and industrial attributes. In the long-term perspective, both copper and gold will benefit from loose liquidity. The difference lies in the fact that the industrial attribute pricing of copper depends on the level of economic prosperity of the fundamentals.

1. The resonance of the new and old paradigms supports the upward trend of the central price of gold. We continue to be optimistic about the performance of gold after the first interest rate cut and the long-term value of the gold sector. We recommend focusing on: Zhaojin Mining, Zijin Mining, Shandong Gold, Shandong Gold International, Chifeng Gold, Hunan Gold, Zhongjin Gold, China Gold International.

2. The pessimistic expectations for copper demand may have been anticipated in advance, limiting the downside potential of copper prices for the year. In the medium to long term, the central price of copper is expected to steadily rise, with related companies expected to benefit. We recommend focusing on: Zijin Mining, Jin Chengxin, China Nonferrous Mining, Luoyang Molybdenum (H).

Risk Warning: US inflation exceeds expectations; US labor market slowdown exceeds expectations; US financial risk events