Zhongzheng Pengyuan: It is expected that the price of gold will remain at a high level of volatility in 2025, and the overall price of black metal will show a trend of first suppression and then rise.

This article published by China Securities Pengyuan stated that although the mild global economic recovery and downward trend in inflation may bring some pressure to the gold market, geopolitical tensions, trade disputes, and continued central bank gold purchases will continue to support gold prices. It is expected that the price of gold will maintain a high-level fluctuating trend in 2025. In 2025, the black metal industry chain will face a complex situation of oversupply of raw materials, differentiated demand, and policy regulation. Recently, the price of gold hit a historic high driven by expectations of a rate cut by the Federal Reserve and geopolitical uncertainties, while silver showed relative weakness. Factors such as central bank gold purchases, growing investment demand, and the decoupling of the US dollar from gold are the main drivers of the gold price increase. In 2025, the gold market will continue to be influenced by multiple factors: the resilience of the US economy and inflation pressure, uncertainty in Federal Reserve policies, and the potential impact of Trump's tariff policies. Despite the mild global economic recovery and downward trend in inflation that may bring some pressure to the gold market, geopolitical tensions, trade disputes, and continued central bank gold purchases will continue to support gold prices. It is expected that the price of gold will maintain a high-level fluctuating trend in 2025. In 2025, the black metal industry chain will face a complex situation of oversupply of raw materials, differentiated demand, and policy regulation. Global iron ore supply is expected to increase by 53 million tons, domestic coking coal production is expected to increase by approximately 9 million tons, and coking coal imports will also rise, but at a slower pace. The steel market will be impacted by multiple factors such as production control, slowing demand, and export uncertainties. Capacity replacement policies will become stricter, energy consumption and carbon tax controls will limit the total steel production capacity, and a sluggish real estate industry will drag down demand. While special bonds and special policies are expected to boost manufacturing demand, steel exports will still face restrictions from anti-dumping policies. It is expected that the overall prices of black metals will show a downward trend in the first half of the year, with profits shifting from raw materials to finished products. In the second half of the year, there may be opportunities for bottom-fishing in the raw materials market, prices may rise again, and steel mill profits may be squeezed. Expected price ranges are: rebar steel 2800-3600 yuan/ton, iron ore 650-900 yuan/ton, coking coal 900-1600 yuan/ton. 1. Precious Metals: Gold showing strong performance, supported by safe-haven demand In 2024, expectations of a Fed rate cut and geopolitical uncertainty jointly drove gold prices to a historic high, while silver remained in a range-bound trend. Expectations of a Fed rate cut and geopolitical uncertainty jointly drove the strong rise in the prices of precious metals, particularly gold prices hitting historic highs multiple times. COMEX gold saw a yearly increase of 27.4%, ranking second among major asset classes, only behind the stock market, and outperforming the foreign market. Exchange rate fluctuations have affected the trends of precious metals domestically and abroad, with the recent weakening of the dollar index impacting the RMB exchange rate, but the long-term trend being constrained by various factors. Expectations of a Fed rate cut began at the start of the year, but as economic data was released, the rate cut was pushed back to September 2024. The stock market also showed strong performance. Furthermore, global central banks, especially the Chinese central bank, increased their gold reserves, reflecting distrust in political uncertainties and dollar assets. The decline in US bond prices was mainly due to rising real interest rates. Other assets, such as the French and Korean stock markets, also experienced declines. The gold price trend in 2024 can be divided into two stages. From a stage perspective, from the beginning of the year until September, amidst a strong dollar and high US bond yields, gold prices continued to rise, showing the increasing prominence of gold as a commodity. After the Fed initiated a rate cut cycle in mid-September, gold prices further rose. In November, the uncertainty brought by the US election intensified fluctuations in gold prices. Overall, the rise in gold prices in 2024 was mainly driven by the following factors: Geopolitical and economic uncertainty, such as the Russia-Ukraine conflict, Middle East tensions, and global economic growth slowdown intensified market risk aversion, leading to capital inflows into gold. Central bank gold purchases: Global central banks bought over 1000 tons of gold in 2024, exceeding this level for the third consecutive year, providing important support for gold demand. Looking at China's central bank gold purchases, the Chinese central bank increased its gold holdings for three consecutive months, but only increased by 160,000 ounces in January, showing a marginal slowdown in purchase speed. Growth in investment demand: Global gold ETF demand experienced positive inflows in the third and fourth quarters of 2024, particularly the active participation of Asian and Western investors, driving the rise in gold prices. Decoupling of the US dollar and gold: Despite the strong US dollar index, gold prices were not suppressed, showing its attributes as an alternative to the US dollar. Policy uncertainties affect the precious metals market, and the main factors affecting the prices of precious metals in 2025 are Trump's tariff policy, the US economy and inflation, the US dollar, and global markets. Regarding the US economy, although it has shown strong resilience, it is expected to transition from a soft landing to recovery in 2025. However, the implementation of policies will directly influence the extent of the inflation rebound. According to the latest data, the total GDP of the US reached $29.2 trillion in 2024, with a real growth rate of 2.9% year-on-year. In January 2025, the increase in non-farm employment numbers was lower than expected, but the unemployment rate dropped to 4.0%, and average hourly wages saw a significant increase compared to the previous period. In addition, the US manufacturing PMI continued to decline in 2024, but showed signs of recovery at the beginning of 2025. Furthermore, the Federal Reserve's policies may show a more hawkish tendency at certain points, which will also pose a challenge to the precious metals market. Inflation pressure continues to exist. In January 2025, the year-on-year growth rate of the US CPI rebounded to 3.0%, and the core CPI year-on-year growth rate rebounded to 3.3%, indicating a persistent low-burning inflation trend. These changes in economic indicators will have a significant impact on the market trends of precious metals in 2025, requiring close attention to the direction of adjustments in US monetary policy. Market expectations for the pace of Fed rate cuts in 2025 will slow down, although the labor market shows some resilience, supporting consumer spending and economic growth, but the unemployment rate is on the rise. It is expected that the Fed will have two rate cut opportunities in 2025, two in 2026, and one in 2027. The majority of policy makers within the Fed may adopt a more hawkish stance at certain times, posing a challenge to the precious metals market.It is believed that the reasonable range for interest rates in 2025 is 3.75% to 4%. The GDP forecast for 2025 has been revised from 2% to 2.1%, the unemployment rate has been lowered from 4.4% to 4.3%, PCE inflation has been raised from 2.1% to 2.5%, and core PCE has been raised from 2.2% to 2.5%. The recent strength and pullback in the US dollar index are influenced by Trump's presidency.In terms of tariffs, the discussion here is about the impact of Trump's different tariff policies on the price of gold in 2025. Scenario 1: The US imposes tariffs on gold. The implementation of tariff policies will increase the cost of gold imports, limiting market supply and further pushing up the price of gold. In addition, concerns about the uncertainty of tariff policies in the market may prompt investors to buy gold faster, pushing COMEX gold futures prices higher. Under tariff expectations, arbitrage behavior from London to New York for gold may continue or accelerate, leading to further reduction of London gold stocks and continued increase of COMEX stocks. This supply-demand imbalance may further push up the price of gold in the short term. Once tariffs are implemented, arbitrage demand will sharply decrease, COMEX gold stocks may gradually be released, speculative long positions may take profits, shorts may cover, and the price of gold may face downward pressure. However, in the long term, the attractiveness of gold as a safe-haven asset may persist due to the escalating global trade tensions. Scenario 2: The US does not impose tariffs on gold. The market's disappointment about the tariff expectations may result in a rapid adjustment of the price of gold. Investors may reduce their demand for gold as a hedge, leading COMEX gold stocks to flow back to London, putting significant downward pressure on the price of gold. The receding risk sentiment will cause funds to flow out of the gold market and into other asset classes such as stocks and bonds. This shift in sentiment may lead to significant volatility in the price of gold in the short term. Although the uncertainty of tariff policies is resolved, factors such as global geopolitical tensions, economic data uncertainty, and central bank gold purchases may continue to provide some support for the price of gold. Therefore, the magnitude of the price correction for gold may be relatively moderate. In terms of the US dollar and global markets, the US dollar index may reach a temporary high in the short term, with future trends depending on policy implementation. The Eurozone's economic growth momentum is weak, with limited fiscal expansion, which is unfavorable for the euro's performance, and the US dollar is expected to strengthen further. However, the strong US dollar is negative for commodities and gold. In the long term, although real interest rates may tend to decline, central bank gold purchases will provide support for the price of gold. In conclusion, the macro environment is friendly to the price of gold. Gold, as a globally universal equivalent, hedges geopolitical risks, and central bank gold purchases provide long-term support for the price of gold. It is predicted that the geopolitical situation in 2025 may tend to stabilize, but global trade tensions may escalate, economic recovery may be moderate, and the process of inflation falling may accompany fluctuations. The uncertainty of Trump's policies may exert upward pressure on inflation. The price of gold in 2025 may maintain a high-level oscillatory trend. In the second part, for the black commodities sector: oversupply, divergent demand, policy regulation, and continuous oversupply of raw materials. In 2024, the futures prices of steel continued to decline, mainly affected by a significant drop in demand. In particular, the demand for steel in real estate and infrastructure construction decreased by 30% and 60% respectively, becoming key factors dragging down the market. Under the impact of large-scale equipment updates and the replacement of consumer goods, industries such as automobiles, home appliances, machinery, and shipbuilding showed good growth in steel demand. Despite the strong performance of manufacturing and exports and the strong demand for sheet metal, steel mills maintaining high production exacerbated the oversupply problem. Although real estate market policies are being optimized, a decline in household income expectations and lack of confidence have resulted in a decrease in total housing demand, with market adjustments expected to continue. In 2024, the steel industry faced severe challenges, with a significant drop in consumption, a 4.8% year-on-year drop in crude steel consumption, a decline in capacity utilization, and a decline in the capacity utilization rate of rebar and wire rod to 47.7% and 38% respectively. In 2024, there was oversupply in upstream production capacity, with oversupply in iron ore and coking coal, and a significant increase in inventory. Although steel exports reached 110 million tons, a 22% year-on-year increase, the overall industry profit margin was extremely low, with a total profit of only 7.8 billion yuan, and most companies were in a loss-making state. Global pig iron production decreased by 1.7%, oversupply led to increased inventory, and weakened industry bargaining power. In terms of iron ore, global demand for iron ore was weak, with noticeable growth in shipments. Global iron ore was clearly oversupplied. From January to November 2024, global pig iron production (including direct reduced iron) was 1.27366 billion tons, a 17% year-on-year decrease. Global iron ore shipments were 4.6084 million tons, a 2.9% year-on-year increase. China's iron ore inventories accumulated significantly. In the Chinese market, from January to November 2024, iron ore imports were 1.12562 billion tons, a 43% year-on-year increase. Domestic pig iron production was 782.77 million tons, a 34% year-on-year decrease, and inventories accumulated significantly. By the end of November 2024, total iron ore inventories increased by 27.12 million tons compared to the beginning of the year, a 40.96 million ton increase year-on-year. In 2025, the steel industry continued to face the problem of oversupply, with policies continuing to tighten restrictions on crude steel production, and the downward trend in demand may be narrowing, but the decrease may be modest. In terms of demand, in the real estate sector, the demand for steel in the real estate market is expected to continue to decline, traditional infrastructure construction is constrained by policies, and local governments face significant fiscal pressures. In addition to strictly controlling new government investment projects, projects that can be newly built include those with a completion rate of over 50% before the project, cutting investment scale; projects with a completion rate of less than 50% (approved by provincial governments, cutting investment scale). Projects that should be delayed or stopped include those with a completion rate of over 50% but with major problems, which should be delayed or stopped; those with a completion rate of over 30% but less than 50% should be delayed; those with a completion rate of less than 30% should be delayed or stopped. Looking at the new contracts signed by the eight major central enterprises, in the first three quarters of 2024, the eight major construction central enterprises signed new contracts worth 10.5 trillion yuan, a year-on-year decrease of 3%, and the national construction industry signed new contracts worth 2.23 trillion yuan, a year-on-year decrease of 4.7%, and the total investment in new projects across the country from January to September totaled approximately 25.8 trillion yuan, a year-on-year decrease of 36.8%. In terms of the manufacturing sector, the development trend is stable, but there is uncertainty in exports. Supply is expected to remain stable, and a possible slight increase in furnace prices may improve steel mill profits marginally, but the profit space is limited, and steel mills have insufficient motivation to reduce production. In terms of policies, capacity replacement and energy conservation and carbon reduction policies will continue to be implemented to prevent production overcapacity.Expand and control the total amount of steel. According to estimates, large-scale equipment updates and the policy of replacing old with new are expected to drive steel consumption by about 7-8 million tons per year. The steel varieties involved mainly include stainless steel sheets, non-oriented silicon steel, hot rolled sheets, cold rolled sheets, galvanized sheets, seamless pipes, etc. The problem of excess iron ore production capacity in the upstream sector will become more apparent by 2025. Supply growth is certain, but actual supply growth will be influenced by the pace of capacity release, shipping schedules, and market control strategies. In 2025, the global iron ore market will see a significant increase in new production capacity, with an expected release of 53 million tons. Four major mines will be the main drivers of capacity growth. Vale's S11D construction project, Capanema project, and VGR1 project will continue to progress, planning to release around 33 million tons of capacity in 2025. In addition, Rio Tinto's Western Slopes project is expected to deliver its first batch of iron ore in 2025 with an annual capacity of 25 million tons, while the Western Range project is expected to start production in October 2025, but actual capacity release may be limited. FMG's Iron Bridge project will reach full production capacity in the third quarter of 2025, with an expected additional shipping volume of 5-9 million tons for the year. At the same time, the capacity recovery work at Samarco mine area, a joint venture between BHP and Vale, is steadily progressing, with an expected release of about 7.5 million tons of capacity in 2025. In terms of non-mainstream mines, an additional capacity of around 20 million tons is expected in 2025. Among them, the Onslow Iron Project is the main contributor, with a design capacity of 35 million tons per year. It delivered its first batch of iron ore in May 2024 ahead of schedule and plans to achieve full production in June 2025. In addition, the Western Range Zone 1 and 2 blocks, developed by WCS, are expected to start shipping by the end of 2025 and reach full production capacity of 60 million tons annually by 2028. Overseas mines will continue to maintain high production and shipping rates in 2025, and the iron ore supply situation is expected to remain loose. However, actual supply growth will be influenced by the pace of capacity release, shipping schedules, and market control strategies. The largest and most anticipated iron ore project for future production is the Simandou Iron Ore Project in Guinea. The Simandou Iron Ore Project is expected to start production by the end of 2025, with production in 2025 not significant, but expected to exceed 120 million tons in additional production by 2026, significantly changing the global iron ore supply situation. As one of the world's largest undeveloped high-grade iron ore projects, the South and North blocks of the Simandou project are expected to achieve annual production of 30 million tons each by the end of 2025, totaling 60 million tons. By 2026, with further capacity increases, annual production for the South and North blocks is expected to increase to 60 million tons each, with total production expected to exceed 120 million tons. The development of the Simandou Iron Ore Project will significantly change the global iron ore supply situation and provide stable supply of high-grade iron ore for the global steel industry, increasing future pressure on iron ore supply. Regarding coking coal, there are expectations of some recovery in production in 2025, with supply expected to increase slightly. From January to October 2024, China's total coal supply reached 4.328 billion tons, an increase of 115 million tons or 2.72% year-on-year. The production of thermal coal has grown significantly, while the total supply of coking coal has decreased slightly by 540,000 tons or 0.11% year-on-year. Overall, domestic coking coal production remained negative, with reductions mainly concentrated in the Shanxi region. At the same time, coal imports remained high, with China importing a cumulative 435 million tons of coal and brown coal from January to October, an increase of approximately 51.75 million tons or 13.49% year-on-year. Import increases mainly came from Indonesia, Mongolia, and Australia, while Russian imports decreased. Looking ahead to 2025, domestic coking coal production is expected to see a recovery in growth. The Shanxi region is expected to increase coking coal production by 5-6 million tons through a "stabilized production and supply" policy, while Inner Mongolia and Xinjiang's raw coal production will remain at high levels, with increases mainly in thermal coal. In addition, coking coal production in Anhui, Heilongjiang, and other areas is expected to recover by 3-4 million tons. Overall, it is estimated that domestic coking coal production will increase by approximately 9 million tons year-on-year in 2025, with a growth rate of about 1.9%. In terms of imports, Mongolia plans to export 83 million tons of coking coal to China in 2025, an increase of 5 million tons year-on-year; while Australia's metallurgical coal exports are expected to increase by 3 million tons. Although import growth may slow down, total imports are still expected to increase by 6.5 million tons, with a growth rate of 5.5%, accounting for 20.7% of total supply. Overall, taking into account both domestic production and imports, it is estimated that China's total coking coal supply in 2025 will reach 606 million tons, slightly higher than in 2024, with an increase of approximately 15.5 million tons year-on-year, a growth rate of 2.6%. In conclusion, the black series market in 2025 will face a complex situation of oversupply, differentiated demand, and policy regulation, and price trends will show a trend of first suppression and then rise. The steel market in 2025 will be influenced by factors such as capacity regulation, demand changes, and export uncertainties, including capacity regulation, slowing demand, and export uncertainties. The policy of capacity replacement is becoming stricter, and energy consumption and carbon tax controls will further limit the total steel production capacity. The landing of special and special bonds will drive an increase in physical work volume, while the "two new" policies are expected to boost demand in the manufacturing industry. However, the real estate industry continues to be in a slump, and steel demand is expected to decrease slightly in 2025. Anti-dumping policies will limit the upper limit of steel exports, while the proportion of steel billet exports may increase. In addition, the uncertainty in overseas situations will also affect steel exports. Overall, the prices in the black series are expected to continue to decline, and profits from raw materials will be transferred to finished products. However, once the transfer of profitability from upstream is completed, there may be opportunities for bottom-fishing in the raw materials market in the second half of 2025, with the price center in the black series expected to rise again. Steel mill profits may be further squeezed. The black series market in 2025 will face a complex situation of oversupply, differentiated demand, and policy regulation, and price trends will show a trend of first suppression and then rise. The price range for rebar is expected to be between 2800-3600 yuan per ton, iron ore: between 650-900 yuan per ton, and coking coal: between 900-1600 yuan per ton.tonJe ne parle pas franais trs bien, mais j'essaie d'apprendre.