CITIC Construction Investment: Tariffs land, gold soars, copper and aluminum resist decline and lie in wait

According to the Zhitong Finance APP, CITIC Construction Investment has released a research report stating that during the Spring Festival holiday, DeepSeek and Trump's new tariff policy dominated the overseas asset hedging sentiment. Gold led the rise to reach a historic high, while the US dollar and US Treasury bonds strengthened, and most commodity prices fell. The Federal Reserve's January interest rate meeting expressed a dovish stance, and the US fourth-quarter GDP was below expectations. The Trump administration's widespread imposition of tariffs has intensified the confrontational sentiment among major economies, which is conducive to gold prices challenging new highs, and gold stocks are expected to recover profits. In addition, under the backdrop of ample liquidity, basic metals with relatively certain consumption combined with supply constraints are still recommended for allocation.

CITIC Construction Investment's main viewpoints are as follows:

Industrial Metals: In the week before the holiday, the price changes for LME copper, aluminum, lead, zinc, and tin were 1.0%, -1.8%, -1.5%, -4.1%, and 1.0%, respectively; during the Spring Festival period (from January 27 to February 3), the price changes for LME copper, aluminum, lead, zinc, and tin were -1.7%, -0.4%, 0.4%, -0.5%, and -0.7%, respectively. The prices of industrial metals are determined by both "financial attributes" and "commodity attributes." From a financial perspective, the Federal Reserve has entered a rate-cutting cycle; from a commodity perspective, global copper and aluminum inventories are at relatively low levels, and the recovery of the Chinese economy is expected. Coupled with the boost from the new energy industry, the demand for copper and aluminum is expected to improve.

Tariffs Land, Gold Soars, Copper and Aluminum Resist Decline and Lie in Wait

(1) The dovish FOMC, low U.S. GDP, and uncertain Trump tariffs collectively push gold prices to new highs. The Federal Reserve maintained the policy interest rate at 4.25-4.5% during the January meeting, but Powell stated afterward that the current rate is still well above the neutral rate level, indicating a dovish stance. The U.S. GDP for Q4 2024 grew at an annual rate of 2.3%, a decrease of 0.8 percentage points quarter-on-quarter, with an annual GDP growth of 2.8%, below market expectations. The Trump 2.0 trade war has fully commenced, imposing a 25% tariff on Mexico and Canada and a 10% tariff on China. Although the U.S. announced a temporary suspension of tariff implementation on Mexico and Canada, the uncertainty brought about by Trump's tariff policy regarding the direction of the global economy has boosted gold's safe-haven appeal. Additionally, DeepSeek impacts the fundamentals of U.S. tech stocks, reinforcing the logic of gold's de-dollarization. The global economy is shifting from cooperation to differentiation and even confrontation, establishing the underlying logic for gold to continuously challenge new highs, and gold stocks are expected to welcome a recovery trend.

(2) Copper and aluminum prices show resilience before the threat of tariffs. As of 3:00 PM on February 4, LME copper closed at $9,147.5 per ton, down 0.85% from the pre-Chinese New Year closing price, while LME aluminum closed at $2,619 per ton, roughly flat compared to the pre-Chinese New Year closing price. In the face of the threat of large-scale trade tariffs imposed by the U.S., copper and aluminum prices performed resiliently during the Spring Festival. Firstly, the manufacturing data of major global economies is performing well: China's January Caixin Manufacturing PMI is 50.1, maintaining expansion for the fourth consecutive month; the U.S. January ISM Manufacturing PMI is 50.9, with expectations of 49.8 and a previous value of 49.3. Secondly, the 10% tariff imposed by the U.S. on China has created an expectation gap. Thirdly, market liquidity is abundant, and there is an optimistic sentiment regarding China's economic recovery after the Spring Festival. Fourthly, the supply of copper and aluminum is not overly ample, with global production increases of 2.4% and 1.6% respectively by 2025, while the booming development of electric vehicles and artificial intelligence globally presents a vast demand for copper and a promising outlook for aluminum lightweighting, raising the price levels of copper and aluminum.

Risk Warning

1. A significant global economic recession leading to a cliff-like decline in consumption. The World Bank's latest "Global Economic Outlook" predicts global GDP growth rates of 2.7% for 2025 and 2026. The institution believes that with inflation easing and growth stabilizing, the global economy is on the path to a soft landing, but risks still exist. Economic data from Europe and the U.S. has already shown a downward trend, and if a deep recession occurs, the impact on the consumption of non-ferrous metals would be enormous.

2. U.S. inflation spiraling out of control, with the Federal Reserve tightening monetary policy beyond expectations, and a strong dollar suppressing equity asset prices. The U.S. is unable to effectively control inflation, leading to continuous interest rate hikes. The Federal Reserve has implemented significant consecutive rate increases, but services, particularly rents and wages, appear sticky, constraining the decline in inflation If the Federal Reserve maintains high-intensity interest rate hikes, it will be unfavorable for non-ferrous metals priced in US dollars.

3. The consumption growth rate of the domestic new energy sector is below expectations, and the real estate sector continues to experience sluggish consumption. Although policies on the sales side of real estate have been relaxed to varying degrees, residents' willingness to purchase remains insufficient, and the progress in resolving the debt risks of real estate companies is not smooth. If sales continue to show no improvement, the completion of real estate projects in the later stage will face the risk of stalling, which will be detrimental to the consumption of certain non-ferrous metals in the domestic market