Zinc prices continue to rise in July

 

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According to the Commodity Market Analysis System of the Business Society, as of July 31, the zinc price was 20898 yuan/ton, an increase of 3.42% compared to the fluctuating zinc price of 20206 yuan/ton on July 1. The macroeconomic recovery in July was positive for the non-ferrous metal market, and zinc prices fluctuated and rose in July.

 

Zinc prices have risen for two consecutive months

 

According to the Commodity Market Analysis System of the Business Society, zinc prices rose slightly in July, an increase of 3.42%, with zinc prices rising for two consecutive months. Since the trend of continuous decline in zinc prices in the first half of the year was reversed in June and rebounded, zinc prices have maintained an upward trend in July, with a slight increase. The economy has rebounded, the non-ferrous sector has rebounded, and zinc prices have followed suit.

 

China Manufacturing Purchasing Managers’Index

 

According to the data released by the National Bureau of Statistics, in July, the Purchasing Managers’Index (PMI) of the manufacturing industry was 49.3%, up 0.3 percentage points from the previous month. PMI rose for two consecutive months, and the prosperity level of the manufacturing industry continued to improve. Although the PMI was still below 50% in July, it has slightly rebounded for two consecutive months, and the overall level of domestic manufacturing prosperity continues to improve. The domestic macro economy has rebounded, and the zinc market is favorable.

 

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Long Short Game in Zinc Market

 

The June US CPI announced in July only increased by 3% year-on-year, lower than the market estimate of 3.1%. The CPI data has fallen beyond expectations, and Wall Street generally expects the Federal Reserve to restart the pace of rate hikes. However, it is also expected that the Federal Reserve’s rate hike in July may be the last rate hike of the year. The non-ferrous metal market is relatively strong, China’s strong policies are gradually implemented, the expectation of macroeconomic recovery is strengthened, and the zinc market is bullish.

 

7. In August, some smelters on the supply side will enter the maintenance period, which may lead to a significant reduction in supply. Zinc smelting processing costs will increase, and the decrease in zinc smelting production will be limited. At the same time, imported zinc will also provide a certain supplement to the supply side. The supply side of the zinc market may remain relatively loose, and the LME market’s zinc ingot inventory will skyrocket in July. The zinc market has sufficient supply, and the overall supply of zinc in the market exceeds demand. The bearish pressure of the zinc market still exists.

 

Future Market Forecast

 

Data analysts from Business Society believe that in the international market, the US interest rate hike may come to an end, while in the domestic market, strong support policies have been implemented, macroeconomic sentiment has improved, and non-ferrous metals have generally risen in July. The macroeconomic recovery is beneficial for the zinc market; However, zinc processing fees have increased, LME zinc ingot inventory has surged, and the zinc market is oversupplied. The downward pressure on the zinc market still exists. In the future, strong supply still exists, weak demand improves, and there are risks of rising and falling in the zinc market. It is expected that the zinc price will fluctuate and consolidate strongly in the future.

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Precious metals rose first and then fell in July

 

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In July, the price of precious metal gold rose first and then fell, indicating an overall upward trend. According to the commodity market analysis system of the business community, the price of gold in the Spot market will be 456.44/g on July 31, 2023, with a monthly drop of 1.75%; Compared with the peak price of this month (July 20), the gold Spot market price was 461.30 yuan/g, down 1.05%.

 

Silver fell back to the beginning of the month

 

According to the commodity market analysis system of the business community, the average silver market price will be 5736.67 yuan/kg on July 31, 2023, up 5.60% month on month, down 3.17% from the peak of this month (July 20), which is 5924.33 yuan/kg.

 

Summary of Price Trends of Precious Metals and Crude Oil

 

In the early stage, the correlation between precious metals and crude oil trends is strong. After the second half of 2022, precious metal prices have bottomed out and stabilized, and the magnitude of macro factors affecting them has begun to show differentiation. The trend of precious metals and crude oil began to converge in late March, but after mid April, the trend began to diverge again. Mainly due to the increased impact of risk aversion on the rise of precious metal prices. Recently, crude oil prices have rebounded, and precious metal prices have also followed suit.

 

Comparison of precious metal gold and silver price trends in the past year

 

In 2022, the rise and fall trends of precious metal gold and silver have converged, but the decline in silver was deeper from April to August, and the recent recovery has been more significant. In December, silver continued its strong trend last month, and gold began to consolidate at high levels. In 2023, precious metal gold and silver have consolidated at high levels, with a slight decline in February. Since March, precious metal prices have started to rise. Silver prices began to decline in May, while gold remained relatively strong. In June, gold prices reached a high level and silver prices began to rise.

 

Policy Fundamentals Data

 

In July, the overall decline of bulk commodities stabilized and rose. In addition to the unexpected decline of the US CPI in July, the market once again expected that the process of the Federal Reserve’s interest rate increase would come to an end, and the U.S. Dollar Index once fell below the 100 threshold; However, in the second quarter of the United States, real GDP grew at an annualized rate of 2.4% month on month, and the tight economic growth and employment conditions pushed up the US dollar exchange rate and US bond interest rates, weakening the momentum of gold’s rebound.

 

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The Federal Reserve Board of Governors of the United States ended its two-day monetary policy meeting on the 26th and announced that it would raise the target range of the Federal funds rate by 25 basis points to between 5.25% and 5.5%. This is the 11th rate hike by the Federal Reserve since entering the current rate hike cycle in March 2022, with a cumulative rate hike of 525 basis points. After the monetary policy meeting in June 2023, the Federal Reserve announced a pause in interest rate hikes. Interest rate hikes have suppressed interest free asset prices, which is also the main reason why precious metal prices have moved down from their high points before and after interest rate hikes.

 

Future Market Forecast

 

At present, the price of precious metals has been fluctuating in the high range after hitting a 10-year high in the early stage. In the early stage, we expected that under the high inflation and high interest rate hikes, the pace of overseas economic recession may lead to a relatively strong sense of risk aversion, which is currently reflected in prices. Some central banks around the world increased their holdings of Gold reserve, which also formed some support for gold prices.

Silver rose significantly in July, and its price was overestimated by fundamentals, leading to profit taking in funds. In addition, the Federal Reserve raised interest rates by 25 basis points in July and stated that there was no interest rate cut within the year, breaking previous optimistic expectations. In the short term, precious metals have been volatile and bearish after recent highs.

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