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[minutes of the meeting] if the global economy recovers, precious metals are expected to reach their peak next year. LME trading slows down, and there is still an opportunity for arbitrage.
Sep 4,2020 06:00CST
translation
Source:SMM
The content below was translated by Tencent automatically for reference.

SMM9 March 3: on the afternoon of September 2, SMM held an online seminar with representatives of the London Metal Exchange (LME), Bloomberg Industry Research (Bloomberg), and easy access Trading Group (ECTP). The meeting was chaired by Ye Jianhua, director of SMM big data. Liu Yang, senior vice president of the London Metal Exchange in China, Zhu Yi, global head of metals and mining at Bloomberg, Wang Xiaohong, director of metals and mining research at (ECTP) of Yi Keda Trading Group, and Liu Xiaolei, director of big data of Shanghai Nonferrous Metals Network, discussed and shared the trend of basic metals / precious metals, investment strategy, macro environment, and the exchange's flexible strategy on the epidemic.

Zhu Yi, global head of metals and mining at Bloomberg: precious metals prices are expected to reach another peak next year.

Generally speaking, affected by the epidemic, the global economy showed an "elevator" decline in the first half of the year, and gold was greatly favored as a safe haven asset. In addition, it is expected to be difficult for the global economy to return to pre-epidemic levels this year, like climbing stairs.

Affected by the epidemic, both supply and demand of gold fell in the first half of the year, and fundamentals do not support a sharp rise in gold. In the second half of the year, in the absence of major changes in supply and demand, the capital side is still the dominant factor in gold prices.

From the chart below, the trend of the gold price mainly depends on eight factors. Referring to the situation in 2011, when all eight factors support the gold price, the gold price rises rapidly. According to this logic, gold prices are expected to reach another peak in 2021.

Liu Yang, Senior Vice President, head of London Metal Exchange China: risks and opportunities coexist in LME Exchange.

Commodities reflected market performance in a very timely manner, with base metal prices falling sharply in late January and early February, but the S & P 500 was still hovering at high levels and did not begin to tumble until mid-March. Since April, with the regulation and control of macro and monetary policies, China has taken the lead in coming out of the trough, and the prices of basic metals have been repaired step by step in an orderly manner.

LME trading volume increased sharply in the first quarter compared with the same period last year, and the performance was more obvious in March, mainly due to the large volatility in the commodity market at that time, bringing more trading opportunities to the market. After the second quarter, trading volume slowed significantly, but there are still some arbitrage opportunities.

Speaking of the crisis, in March, because of the blockade in London, LME closed its public outcry trading floor and used an electronic trading platform for price discovery, breaking a 140-year-old trading practice, and is closely watching the government and looking for an opportunity to restart the trading floor. It is reported that LME plans to switch to electronic warehouse receipts before the end of the year to improve operational efficiency and reduce operational risks.

LME's warehouse acts as a global metal reservoir and aims to ensure the efficient operation of its storage facilities. LME has more than 500 warehouses in 34 regions around the world, and it will not cause goods to become negative because the warehouses in one place are in short supply. Compared with the 6-7 million tons of metal in the financial crisis, it is now about 2 million tons. In addition, LME is actively focusing on warehouse space and can be approved for more warehouse capacity as needed. In the past six months, LME has increased its inventory area by about 250000 square meters, mainly in South Korea, Malaysia, Singapore, the Netherlands and Detroit.

Liu Xiaolei, director of SMM big data: adjust investment strategy flexibly in large cycle and small band.

China is very dependent on overseas raw materials, but there is a voice of de-globalization in the global market, but from a long-term point of view, this is a long-term process, in which there may be trade frictions, but there will not be an inflection point soon. the activity of cross-trading inside and outside will continue.

From a macro point of view, the impact of the epidemic on all base metals is equal. From a micro point of view, the impact of each metal is not the same, the analysis of the price trend of each metal should be deep enough. Investors are advised to continue to pay attention to the balance trend of fundamentals, because the trading contradictions are also different in each period of time.

Changes of metal inventory before and after the epidemic

Wang Xiaohong, Director of Metals and Mining Research, (ECTP), Yi Koda Trading Group: eliminating interference and belief is the king.

2020 is a rare major trend year, and the financial properties of metals are perfectly combined with fundamentals. Investors should seize the positions of the major trends, eliminate the interference of fundamentals and short-term metal pullbacks, and need to have enough "faith".

Monetary policy has a great impact on commodity trading strategies. It is suggested that under the guidance of the US dollar and precious metals, we should give more weight to the macro side and appropriately reduce the fundamental weight before there is no big shift in monetary policy.

It is suggested that investors should have a deep understanding of the trading logic of precious metals, which is of great help to the trading of basic metals.

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