Tianfeng: There is potential for copper-gold ration to be upwardly corrected, extreme correction is likely to be achieved through a increase in copper prices.

Tianfeng released a research report stating that the current external environment faced by copper is better than the extreme value in July 2016, whether from the perspective of liquidity or economic fundamentals. The bank believes there is room for a recovery in the copper-to-gold ratio. From the perspective of gold, the current US economy still faces certain risks of decline, and under high interest yield pressure, the Fed is unlikely to turn back to a tightening monetary policy. At the same time, the weakening of the US dollar credit and the escalation of geopolitical conflicts are expected to continue to drive central bank demand for gold, pushing up the price of gold. Therefore, the bank believes that the probability of a trend reversal in the current gold price is small, and the recovery of the extreme copper-to-gold ratio is likely to be achieved through the rise of copper. Key points from Tianfeng: - The price of gold has been rising since 2011, while the price of copper has fallen and remained at a fluctuating level after a relatively rapid market in the first half of 2011. - The copper-to-gold ratio has been continuously decreasing. When the ratio of COMEX gold to LME copper is below 4, it is considered an extremely low level. This situation has occurred four times since 2000. The bank reviews the economic environment at that time, hoping to provide insights into commodity price judgments from a comparative perspective. - Extreme copper-to-gold ratios during two external shocks: the lows in February 2009 and March 2020. The extreme ratios in these two periods were caused by significant external shocks, with a sharp decline in copper prices accompanied by market panic and a sharp rise in the S&P 500 volatility index. During the same period, gold benefited from its safe-haven attributes and the continued decline in real interest rates due to rate cuts. The current global situation does not have such obvious external shocks as in the previous two periods, and the bank believes that the reasons for the extreme copper-to-gold ratio in the current period are significantly different from the previous two periods. - Extreme copper-to-gold ratio without external shocks: the low point in July 2016. The decline in this copper-to-gold ratio began in early 2011, falling from 7.5 in February 2011 to 3.4 in July 2016. During this period, gold prices increased by 1.3%, copper prices fell by 53%, and the decline in the copper-to-gold ratio was entirely led by copper prices. This decline did not experience sudden external shocks like the previous two periods, and the bank detailed the global economic environment during this decline in the copper-to-gold ratio. The bank analyzes the liquidity and economic fundamentals affecting the prices of gold and copper, and concludes that there are factors supporting the upward movements of both gold and copper prices in the current environment. Risk warning: Historical situations may not fully apply to future risks, and uncertainties exist in global copper supply and demand, as well as in geopolitical situations.