China Securities Co.,Ltd.: Concerns over U.S. dollar credit support an upward shift in the central price of gold; long-term copper price expectations have loosened somewhat.

China Securities Co.,Ltd. released a research report stating that the probability of a Federal Reserve rate hike in October first rose and then fell, giving risk assets some breathing room, but turmoil in the AI market weakened expectations for future economic growth, leaving assets lacking upward drivers. The PE ratios of nonferrous equity assets such as gold, copper, and aluminum are all at low levels, and their risk-resistant attributes have attracted capital inflows. Gold prices have stabilized, and gold stocks have performed outstandingly. Base industrial metals face supply disruptions and are supported by low inventories, but macroeconomic expectations are weak, willingness to go long is not strong, and both equity targets and prices are expected to show consolidation trends. The main views of China Securities Co.,Ltd. are as follows: Industry dynamic information Industrial metals: This week, the price changes of LME copper, aluminum, lead, zinc, and tin were -1.3%, -1.6%, -0.03%, -3.1%, and -5.3%, respectively. Industrial metal prices are jointly determined by "financial attributes" and "commodity attributes." From the perspective of financial attributes, the Federal Reserve's rate hike landed as scheduled; from the perspective of commodity attributes, global copper and aluminum inventories are at relatively low levels, China's economic recovery is expected, and coupled with the boost from the new energy industry, copper and aluminum demand growth will improve somewhat. Gold: The probability of a rate hike in October declined, and gold prices rebounded after probing lows U.S. September consumer price index (CPI) rose 0.6% month-on-month and 3.7% year-on-year, with increases higher than August's 0.4% and 3.4%, respectively; the September core indicator rose 2.6%, also above market expectations. The data pushed up the U.S. dollar index and the 10-year U.S. Treasury yield, once putting pressure on gold prices and causing them to retest the $4,100 mark. However, Warsh explicitly stated in a speech in Bangkok that he would not prejudge the outcome of the policy meeting, prompting traders to lower the probability of a rate hike in October. In addition, concerns over AI's high financing costs and profit realization drove some funds into the gold market for safe-haven purposes, pushing gold prices back up. In the long term, debt levels in major economies are high, the U.S. dollar is being overissued, and fiscal support continues to exceed historical averages. For example, the U.S. federal budget deficit for fiscal year 2026 is projected to rise to $1.99 trillion, higher than $1.78 trillion in fiscal year 2025 and the highest level since the pandemic, leading to an increase in the scale of federal debt. Concerns over U.S. dollar credit support an upward shift in the central price of gold. Copper: Macro expectations weakened, copper prices fluctuated at high levels This week, China's refined copper social inventory accumulated to 113,100 tons, and after the contract rollover, the spot premium was 700-900 yuan, with supply in the spot market still tight. The latest copper concentrate TC fell to a historic low of negative $238/dry ton, the profit contribution from the by-product sulfuric acid tightened, and operating pressure in the smelting segment continued to rise. From October to November, several domestic copper smelters will undergo planned maintenance, and electrolytic copper output faces downward pressure. Although commodity attributes are very strong, global AI stock performance has been volatile and economic growth expectations have weakened, leaving copper prices fluctuating at high levels. Recently, industry participants' expectations for forward copper prices have loosened somewhat, believing that the current period is when copper fundamentals are tightest, including low non-U.S. inventories caused by U.S. copper tariffs, China's reduced scrap copper volume, and the AI consumption narrative, which has led to a decline in willingness to go long, with copper prices showing high-level fluctuations. Aluminum: Oversupply expectations have formed, and forward aluminum prices are under pressure This week, China's electrolytic aluminum spot inventory fell by 50,000 tons to 636,000 tons. The rapid destocking dragged up forward-month aluminum prices by affecting near-month aluminum prices. Before that, commodity market investors, based on expectations that the global aluminum market would turn into oversupply next year, entered aggressively to short forward months, and Shanghai aluminum formed a large backwardation structure. Although under the dual impact of overseas capacity commissioning and Middle East restarts next year, the global aluminum market is highly likely to turn into oversupply, this is a slow variable that will be realized gradually. The current reality is that both LME and domestic spot inventories are at low levels, effectively resisting short-selling forces based on long-term oversupply, with aluminum prices supported at 23,000. On the equity side, current pricing of long-term aluminum prices is sufficiently pessimistic. For companies with high dividends based on an aluminum price of 20,000, the dividend yield is already 6%. Given that aluminum prices are unlikely to fall quickly, investors seeking dividend returns may consider allocating on opportunities. Risk analysis 1. A severe global economic recession and a cliff-like contraction in consumption; 2. U.S. inflation spirals out of control, the Federal Reserve tightens monetary policy more than expected, and a strong dollar suppresses equity asset prices; 3. China's new energy sector consumption growth falls short of expectations, and real estate sector consumption remains persistently sluggish.