In recent times, economic data in the United States, including employment and inflation, have declined. If inflation declines accelerate, it may accelerate the process of interest rate cuts. There is still a gap between market expectations and the start of interest rate cuts, but the occurrence of related events may promote policy adjustments by the Federal Reserve.
Price analysis of gold and copper
On a macro level, Federal Reserve Chairman Powell stated that the Fed’s policy interest rates have “entered a restrictive range,” and international gold prices are once again approaching historical highs. Traders believed that Powell’s speech was relatively mild, and the interest rate cut bet in 2024 was not suppressed. The yield of US treasury bond bonds and the US dollar further declined, driving up the international gold and silver prices. The low inflation data for several months has led investors to speculate that the Federal Reserve will cut interest rates in May 2024 or even earlier.
In early December 2023, Shenyin Wanguo Futures announced that the speeches of Federal Reserve officials failed to curb market expectations of easing, and the market initially bet on a rate cut as early as March 2024, causing international gold prices to reach a new high. But considering being overly optimistic about loose pricing, there was a subsequent adjustment and decline. Against the backdrop of weak economic data in the United States and weaker US dollar bond rates, the market has raised expectations that the Federal Reserve has completed interest rate hikes and may lower interest rates ahead of schedule, driving international gold and silver prices to continue to strengthen. As the interest rate hike cycle comes to an end, US economic data gradually weakens, global geopolitical conflicts occur frequently, and the volatility center of precious metal prices rises.
It is expected that the international gold price will break historical records in 2024, driven by the weakening of the US dollar index and expectations of interest rate cuts by the Federal Reserve, as well as geopolitical factors. It is expected that the international gold price will remain above $2000 per ounce, according to commodity strategists at ING.
Despite the decrease in concentrate processing fees, domestic copper production continues to grow rapidly. The overall downstream demand in China is stable and improving, with photovoltaic installation driving high growth in electricity investment, good sales of air conditioning and driving production growth. The increase in penetration rate of new energy is expected to consolidate copper demand in the transportation equipment industry. The market expects that the timing of the Federal Reserve’s interest rate cut in 2024 may be delayed and inventories may rapidly rise, which may lead to short-term weakness in copper prices and overall range fluctuations. Goldman Sachs stated in its 2024 metal outlook that international copper prices are expected to exceed $10000 per ton.

Reasons for Historical High Prices
As of early December 2023, international gold prices have risen by 12%, while domestic prices have risen by 16%, exceeding the returns of almost all major domestic asset classes. In addition, due to the successful commercialization of new gold techniques, new gold products are increasingly favored by domestic consumers, especially the new generation of beauty loving young women. So what is the reason why ancient gold is once again washed away and full of vitality?
One is that gold is eternal wealth. The currencies of various countries around the world and the wealth of currency in history are countless, and their rise and fall are also fleeting. In the long history of currency evolution, shells, silk, gold, silver, copper, iron, and other materials have all served as currency materials. The waves wash away the sand, only to see true gold. Only gold has withstood the baptism of time, dynasties, ethnicity, and culture, becoming a globally recognized “monetary wealth”. The gold of pre Qin China and ancient Greece and Rome is still gold to this day.
The second is to expand the gold consumption market with new technologies. In the past, the production process of gold products was relatively simple, and the acceptance of young women was low. In recent years, due to the progress of processing technology, 3D and 5D gold, 5G gold, ancient gold, hard gold, enamel gold, gold inlay, gilded gold and other new products are dazzling, both fashionable and heavy, leading the national fashion China-Chic, and deeply loved by the public.
The third is to cultivate diamonds to assist in gold consumption. In recent years, artificially cultivated diamonds have benefited from technological progress and have rapidly moved towards commercialization, resulting in a rapid decline in sales prices and a serious impact on the price system of natural diamonds. Although the competition between artificial diamonds and natural diamonds is still hard to distinguish, it objectively leads to many consumers not buying artificial diamonds or natural diamonds, but instead buying new craft gold products.
The fourth is the global currency oversupply, debt expansion, highlighting the value preservation and appreciation attributes of gold. The consequence of severe currency oversupply is severe inflation and a significant decrease in the purchasing power of currency. The study by foreign scholar Francisco Garcia Parames shows that in the past 90 years, the purchasing power of the US dollar has been continuously declining, with only 4 cents remaining from 1 US dollar in 1913 to 2003, an average annual decline of 3.64%. In contrast, the purchasing power of gold is relatively stable and has shown an upward trend in recent years. In the past 30 years, the increase in gold prices denominated in US dollars has been basically synchronized with the speed of currency oversupply in developed economies, which means that gold has surpassed the oversupply of US currencies.
Fifth, global central banks are increasing their holdings of gold reserves. The increase or decrease in gold reserves by global central banks has a significant impact on the supply and demand relationship in the gold market. After the 2008 international financial crisis, central banks around the world have been increasing their holdings of gold. As of the third quarter of 2023, global central banks have reached a historic high in their holdings of gold reserves. Nevertheless, the proportion of gold in China’s foreign exchange reserves is still relatively low. Other central banks with significant increases in holdings include Singapore, Poland, India, the Middle East, and other regions.

Post time: Jan-12-2024