Hualong Securities: Geopolitical risks disrupt monetary policy expectations, major metal price fluctuations intensify.

Hualong Securities: Geopolitical risks disrupt monetary policy expectations, major metal price fluctuations intensify. Hualong Securities released a research report stating that in the first half of 2026, the ongoing US-Israel-Iran conflict led to tighter crude oil supply, a sharp rise in oil prices, and higher US inflation, causing Federal Reserve policy rate expectations to begin shifting. The short-term significant rise in monetary tightening expectations constituted the core macro-level suppression of precious metals represented by gold, and gold prices fluctuated sharply. In industrial metals, strong US copper tariff expectations continued to drive copper prices upward. The inflection point for energy metals was established, with prices rising sharply in the first half of the year. Maintain the industry "Recommended" rating. Hualong Securities' main views are as follows: Precious metals: Under geopolitical conflict and liquidity shocks, gold prices fluctuated sharply, but the center still rose significantly In the first half of 2026, the US-Israel-Iran conflict continued, crude oil supply tightened, oil prices once surged to $110, and imported inflation strengthened US inflation stickiness. The market bet that the Federal Reserve would shift from rate cuts to rate hikes in the second half of the year. At the end of July, CME FedWatch showed the probability of a Fed rate hike in September exceeded 80%. Tightening expectations suppressed gold prices and amplified volatility; however, gold prices still rose sharply compared with the same period last year. The average LME spot gold price was $3,076.39/oz, up 52.41% year on year, and the average spot silver price was $78.47/oz, up 139.32% year on year. The sector's revenue was RMB 228.720 billion, up 21.50% year on year; net profit attributable to parent was RMB 15.108 billion, up 55.97% year on year; gross margin was 15.82%, up 2.30 percentage points year on year, and ROE was 10.53%, up 2.86 percentage points year on year. Profit resilience remained stronger than revenue. Industrial metals: Geopolitical conflict disrupted global economic growth prospects, while US tariff expectations pushed copper prices upward Under the impact of war, the IMF lowered its 2026 global economic growth forecast to 3.0%, and overseas demand came under pressure. However, stronger US copper tariff expectations and the C-L price spread drove cross-Atlantic China Welding Consumables,Inc. arbitrage trades, and copper prices performed stronger than other industrial metals. In the first half of the year, the average LME copper price was $13,083.05/tonne, up 38.73% year on year; the average aluminum price was $3,382.28/tonne, up 33.21% year on year; average lead and zinc prices changed by -0.83% and +22.27% year on year. The sector's revenue was RMB 1,788.953 billion, up 30.57% year on year; net profit attributable to parent was RMB 143.340 billion, up 104.18% year on year; gross margin was 16.28%, up 4.95 percentage points year on year, and ROE was 13.49%, up 5.22 percentage points year on year, showing a pattern of "copper steady, aluminum highly elastic, lead and zinc recovering." Energy metals: Inflection point established, sharp rebound In the first half of the year, the average price of domestically produced battery-grade lithium carbonate was RMB 163,431.98/tonne, and the average price of lithium hydroxide was RMB 152,977.24/tonne, up 132.2% and 127.02% year on year respectively. After the price inflection point was established, the rebound was significant. The sector's revenue was RMB 120.665 billion, up 83.49% year on year; net profit attributable to parent was RMB 16.352 billion, up 566.95% year on year, about 1.7 times that of full-year 2025; gross margin was 28.37%, up 11.70 percentage points year on year, and ROE was 9.00%, up 6.83 percentage points year on year. Among sub-sectors, lithium revenue rose 154.0% and profits turned sharply profitable, cobalt revenue rose 49.4% and profit rose 35.7%, while nickel remained small in scale; the sector has shifted from bottoming out to realizing a rebound. Investment advice Although rate hike expectations remain, the geopolitical situation is still unstable and long-term economic growth still faces uncertainty, so gold may present allocation value. Under fluctuating copper tariff expectations, industrial metals may see volatility.