Zhongtai: The factors of change are accumulating. Awaiting the verification of the September FOMC. It is recommended to pay attention to precious metals and copper and aluminum, which are significantly affected by supply issues in the Middle East.

Zhongtai published a research report stating that the markets pricing of the duration of conflicts still has discrepancies. On the interest rate front, yields on U.S. Treasuries across various maturities continue to hit new highs, with the 30-year yield surpassing levels seen during the 2008 financial crisis, indicating that the risks associated with U.S. debt should not be underestimated. In terms of commodities, the credibility and independence of the Federal Reserve continue to be compromised, with the financial attributes of various major commodities increasingly coming to the fore. Although actual market fluctuations may still be suppressed ahead of the September FOMC meeting, there are undercurrents stirring beneath the surface. While we do not take a position on the outcome of next weeks meeting, from the perspective of addressing medium- to long-term uncertainties, we recommend focusing on precious metals, as well as copper and aluminum, which are heavily influenced by supply conditions in the Middle East. Zhongtai's main viewpoints are as follows: Key Viewpoint: Accumulation of changing factors, awaiting validation from the September FOMC meeting. Behind the current market volatility, various changing factors are accumulating. Geopolitically, on September 5, military conflicts between the U.S. and Iran continued, with the U.S. military stating that it struck three Iranian oil tankers that day in response to attacks on several oil tankers and U.S. vessels by Iran. With both sides' military actions ongoing and no immediate solutions to the issues in the Strait of Hormuz, the regional situation is expected to remain turbulent in the short term, and the market's pricing of the duration of conflicts still has discrepancies. In terms of interest rates, the most noteworthy event last week was not the unexpectedly positive employment data, but rather the comprehensive setbacks in the global bond market. Besides U.S. Treasuries, the yields on bonds from Japan, Germany, France, and Italy have soared to two-decade highs, posing the biggest threat to the current AI-led capital expenditure boom. On the commodities front, the credibility and independence of the Federal Reserve continue to be undermined, and the financial attributes of various major commodities have been increasingly highlighted. While actual market fluctuations may still be suppressed ahead of the September FOMC meeting, there are undercurrents stirring beneath the surface. We do not take a position on the outcome of next weeks meeting, but from a perspective of addressing medium- to long-term uncertainties, we recommend focusing on precious metals as hedging tools against inflation and geopolitical risks, as well as copper and aluminum, which are heavily influenced by supply conditions in the Middle East. Gold: Gold stocks may adjust alongside gold prices; it is advisable to pay attention during dips. On August 22, Federal Reserve Chairman Waller spoke at the Jackson Hole conference, emphasizing the need for potential inflation to clearly and quickly approach the 2% target. Market concerns regarding a rate hike in September have risen again, leading to a pullback in gold prices. Last week, COMEX gold prices closed at $4,477.2 per ounce, marking a slight week-over-week decline of 0.6%. In the short term, gold stocks may follow gold prices downward. However, the decline in long-term U.S. Treasury yields does not depend on the FOMC, but rather on whether global capital is willing to flow back into U.S. Treasuries, which is beyond the Federal Reserve's control. If the U.S. does not change its current expansionary fiscal path, the structural pressure on long-term bond yields will not dissipate with a few interest rate hikes or cuts. We recommend that investors pay attention to the precious metals sector, which stands in contrast to dollar credit, especially during dips. Copper: The U.S. "copper grab" resurfaces, and global copper supply and demand is likely to remain tight in the medium term. The U.S. Department of Commerce originally planned to submit its latest copper market assessment report by June 30, offering recommendations on whether to impose import tariffs on refined copper. Market expectations suggest that the U.S. may decide to gradually impose a 15% tariff on refined copper starting in 2027, increasing it to 30% in 2028. As a result, since May of this year, the price difference between COMEX and LME copper has continued to widen, with the former sometimes trading about $400 per ton higher and reaching a peak difference of $500. On May 22 alone, over 50,000 tons of copper were withdrawn from LME warehouses and shipped to the U.S., marking the largest concentrated withdrawal since 2013. Amid ongoing disparities in copper inventories between the U.S. and the world, Zhongtai believes the global copper supply and demand dynamics are likely to remain tight in the medium term, and we suggest continuously monitoring investment opportunities in copper mining companies. Aluminum: Depletion of social inventories confirms supply-demand dynamics, and high dividends reinforce defensive yield. Following the resurgence of the U.S.-Iran conflict, in addition to uncertainties surrounding the navigation prospects of the Strait of Hormuz, there is also an increase in uncertainty regarding the Middle East region's supply of electrolytic aluminum, which accounts for 9% of global supply. For the global electrolytic aluminum industry, the period of amplified overseas supply gaps could be extended further, leading to tight supply-demand dynamics in the industry in the medium term. The result of reduced overseas aluminum supply is directly reflected in further growth in domestic aluminum exports since May, as well as in the continued depletion of electrolytic aluminum social inventories down to 1.007 million tons during the traditional off-peak season in July. On the other hand, the recent rise in crude oil prices signifies that overseas energy prices are gradually stabilizing at low levels, which suggests that the price bottom for electrolytic aluminum, a physical carrier of electricity, is also likely to be gradually established. Major electrolytic aluminum companies have already completed "de-leveraging" since the beginning of this year and currently maintain high dividend yields. For institutional investors that must remain in the market, it is advisable to actively position in the electrolytic aluminum sector as a defensive strategy. Risk Warning: Macro economic growth slowdown; tariff impacts on demand and industrial chain stability; raw material price volatility; changes in U.S.-China relations; distortion of third-party data; untimely data updates.