CITIC Securities: US rate cut boosts precious metals and base metal prices, new quality productivity demand opens a new era for minor metals

According to the financial news app Zhitong Finance, CITIC Securities released a research report stating that precious metals and limited-supply non-ferrous commodities performed well in the first half of the year, reflecting three core logics: excessive issuance of the US dollar, credit restructuring, the imminent start of the US interest rate cut cycle, and global geopolitical tensions; limited supply due to constraints related to dual carbon policies, prevailing resource protectionism, and insufficient capital expenditure leading to rigid supply constraints; explosive demand, with the Fourth Industrial Revolution driving significant increases in demand for related metals, especially minor metals, which are currently experiencing a golden moment! Looking ahead to the second half of the year, the long-term trend for precious metals and non-ferrous commodities remains bullish, but the recommended allocation sequence at the moment is: minor metals > precious metals > base metals.

Facing the global wave of new technological revolutions, the demand structure for elements is undergoing significant changes. In 2006, the real estate and infrastructure boom brought about a wave of demand for base metals, while under the backdrop of the Fourth Industrial Revolution, a wave of demand for "new quality productivity" metal elements is emerging. For example, lithium, cobalt, nickel, copper, and aluminum are experiencing significant growth in demand due to the increased demand for new energy vehicles, tin is seeing significant growth in demand due to the development of new energy vehicles, photovoltaics, and AI, molybdenum is experiencing significant growth in demand due to the upgrade of metal materials, the development of high-end manufacturing and military industries, and antimony is seeing significant growth in demand due to the demand for photovoltaic glass, silicon wafers, semiconductors, automobiles, and military industries, among others. Therefore, the century-old changes may present a century-old opportunity for resource commodities, with the core logics as follows:

Logic One: On the macro level, excessive issuance of the US dollar, credit restructuring, and the imminent start of the US interest rate cut cycle will stimulate the financial attributes of non-ferrous metals, with precious metals benefiting significantly.

Logic Two: Limited supply, constraints from dual carbon policies and prevailing resource protectionism, and insufficient capital expenditure leading to rigid supply constraints will shift the cyclical attributes from dual fluctuations in supply and demand to single fluctuations in demand, weakening the cyclical attributes, benefiting basic metals such as copper and aluminum.

Logic Three: Explosive demand, with the Fourth Industrial Revolution driving significant increases in demand for related metals, especially minor metals.

Basic metals represented by copper and aluminum, as well as precious metals represented by gold, have continuously demonstrated the above logics. CITIC Securities remains very optimistic about investment opportunities in the aforementioned varieties, but currently, minor metals with significant expected differences, due to their scarcity, more pronounced supply rigidity, and closer ties to the development of new quality productivity, are resonating towards upward shifts in the price center and valuation center of capital market equities. Under different logic combinations, the recommended allocation for non-ferrous metals focuses on 9 categories of varieties: "antimony, tin, germanium, molybdenum, tungsten, gold, silver, copper, aluminum." In addition, new materials such as magnetic materials benefit significantly from the development of new quality productivity in electronics, semiconductors, computing servers, robots, and other areas, showing significant growth potential, and active attention is recommended.

Risk Warning

1. A significant global economic recession leading to a cliff-like contraction in consumption. The World Bank's latest "Global Economic Outlook" predicts a global GDP growth rate of 2.6% in 2024 and 2.7% in 2025. The institution believes that as inflation slows down and growth stabilizes, the global economy is on the path to a soft landing, but risks still exist. Economic data in Europe and the United States has shown a downward trend, and a deep recession would have a huge impact on the consumption of non-ferrous metals

2. The United States is experiencing uncontrollable inflation, with the Federal Reserve tightening monetary policy beyond expectations, and a strong US dollar suppressing asset prices. The US is unable to effectively control inflation and continues to raise interest rates. The Federal Reserve has already implemented significant consecutive interest rate hikes, but services, especially rent and wages, are showing stickiness that constrains the decline in inflation. If the Federal Reserve maintains high-intensity interest rate hikes, it will be unfavorable for base metals priced in US dollars.

3. The growth rate of the domestic new energy sector consumption is lower than expected, while the real estate sector continues to experience sustained sluggish consumption. Although policies on the sales side of real estate have been relaxed to varying degrees, the willingness of residents to purchase is insufficient, and the progress in resolving debt risks of real estate enterprises is not smooth. If sales continue to not improve, the later stage of real estate completion may face risks of deceleration, which is unfavorable for the consumption of some base metals domestically