In recent days, Li Gangfeng, a special analyst for the European natural resources fund Commodity Discovery, published an article stating that as of last Tuesday, the net long position of gold, silver, platinum palladium, and copper funds in the U.S. metal market has rebounded across the board. Currently, the market believes that the probability of the Federal Reserve maintaining interest rates on January 29th remained at 99.5% as of last Friday, with the first rate cut possibly in May to July, and if further cuts occur, they may happen in October or December. Based on current technical analysis, gold prices remain strong, and the first quarter may be the best performing quarter of the year; traditionally, the second and third quarters are weak periods for gold, possibly leading to significant fluctuations and corrections (downward movements). Data source: CFTC/LSEG Workspace *For comparison purposes, the metal equivalent of COMEX gold is divided by 10, and the metal equivalent of COMEX silver is divided by 100. **The reference value of Nymex palladium is currently very low. As of last Tuesday, the net long positions of gold, silver, platinum palladium, and copper funds in the U.S. metal market have rebounded across the board. The net long positions of U.S. gold funds increased by 7% last week, while short positions decreased by 25%. As a result, fund holdings rose from a net long position of 605 tons to 661 tons, the highest level in the past 5 weeks and the 66th consecutive week of net long positions (previously 46 weeks in a row), also accounting for 73% of its peak historical high of 908 tons in September 2019. As of January 14th, the price of gold in U.S. dollars has increased by 2.0% this year (0.9% last week), while net long positions of funds have accumulated by 13.1% during the same period (5.5% last week). Silver, which is highly correlated with gold prices, saw a stronger volatility compared to its cousin. The net long positions of U.S. silver funds increased by 7% last week, while the short positions decreased by 2%. As a result, fund holdings rose from a net long position of 3983 tons to 4479 tons, the highest level in the past 5 weeks and the 45th consecutive week of net long positions, representing 29% of its peak. As of January 14th, the price of silver in U.S. dollars has increased by 3.5% this year, with net long positions of silver funds accumulating by 20.2% (12.7% last week) and short positions declining by 20.8% (19.1% last week). The net long positions of U.S. platinum funds decreased by 17% last week, but due to a simultaneous 24% decrease in short positions, the positions rose from a net long position of 9 tons to 11 tons. Historically, U.S. platinum funds held a net short position for 31 consecutive weeks (from April 2018 to October 2018). The net short positions of U.S. palladium funds rose to 36 tons. The author believes that even though the bull market in palladium has ended, if palladium continues to maintain a significant net short position, it may be difficult for other precious metals to fully reverse. The net short position of U.S. palladium funds has been in this historical long-term net short position for 109 consecutive weeks. U.S. gold fund net long positions have increased by 17% since the beginning of the year (35% cumulative increase in 2024) Data source: CFTC/LSEG Workspace U.S. silver fund net long positions have increased by 71% since the beginning of the year (1% cumulative decrease in 2024) Data source: CFTC/LSEG Workspace U.S. platinum fund net long positions have increased since the beginning of the year (152% cumulative decrease in 2024) Data source: CFTC/LSEG Workspace U.S. copper fund net long positions have increased since the beginning of the year (132% cumulative decrease in 2024) Data source: CFTC/LSEG Workspace Basically, it is clear from the above that despite global inflation heating up in recent years, various metal prices have experienced different degrees of decline, mainly due to the lack of funds in the futures market to drive leverage effects. If someone had a crystal ball years ago and knew about the sudden rise in global inflation, conflicts, and uncertainties this year and went long on precious metals in the futures market, they would most likely lose money. The most ironic thing is that since the global spread of the pandemic in 2020, the net long positions of precious metals in the U.S. futures market have been declining, reflecting a deliberate effort by funds to prevent precious metals from rising. The CFTC weekly report on U.S. copper has been available since 2007. Due to copper being in a bear market from 2008 to 2016, it is not surprising that U.S. copper futures have historically been mostly in a net short position. However, since 2020, the global pandemic outbreak has affected supply and mining operations, coupled with expectations of strong demand for copper in electric vehicles, leading to a rise in copper prices, even reaching new historic highs. However, the current global investment sentiment is entering an economic recession phase, leading to reduced demand for commodities. The net long positions of copper funds have plummeted, and it is not ruled out that China may introduce economic stimulus policies in the first quarter of 2025 to support copper prices, but it is expected that the U.S. copper may show a net short position no later than the second half of the year. If you ask ten experts in the field, probably nine out of ten will say they are optimistic about the prospects of copper, but the author is the tenth. 2024 may be the last good year for copper, and starting next year, there may be a more significant decline - because current copper prices are not cheap for midstream manufacturers and downstream demand in China, and they will continue to seek cheaper alternatives (such as aluminum). Unless India, the U.S., the Middle East, or Africa undergo a large-scale infrastructure revolution, copper prices may follow this trend in the coming years. The author has updated the gold price indicator that provides important insights into the short-term direction of gold mines. Last week, the U.S. gold price/North American gold mining stock ratio saw a decline: Data source: LSEG Workspace The gold price/North American gold mining stock ratio as of Friday (17th) was 18.37X, down by 0.8% from 18.51X on the 10th, a cumulative decrease of 4.0% this year. It increased by 16.5% in 2024. The total return of mining stocks has lagged behind physical gold for at least three consecutive years. Since 2009/2010, mining stocks have always lagged behind the underlying commodities, and in recent years, even oil/natural gas production companies have faced similar situations. The author believes that one reason for this is the increasing importance of environmental, social responsibility, and corporate governance (ESG) issues in the investment community. In 2021, for example, Blackrock and the U.K. Parliament *The translation provided is a general translation and may not accurately convey the intended meaning of the text.They will promise not to invest in coal mines and oil production companies anymore, and they are definitely not the only fund company committed to only investing in companies and industries that prioritize ESG.Now that Trump has been elected, theoretically it is good news for mining companies, as the market believes Trump values engineering development over environmental protection (speculators should pay attention to some projects in the United States that have not been developed for various reasons in the past, market anticipates policies will possibly get the green light). However, the market also believes that the financial market will see a strong dollar, reduced consumption (due to increased tariffs), which is not favorable for commodity prices. Moreover, in the current bullish environment for US stocks, the mining sector might continue to be overlooked. The future copper price depends on whether the US will further promote large-scale infrastructure projects. The author believes that tracking overseas gold mining stocks is a reliable forward-looking tool. For example, if the gold price continues to rise but gold mining stocks suddenly drop, caution is advised. Gold-silver ratio The gold-silver ratio is an indicator of market sentiment. Historically, the gold-silver ratio has operated at levels between approximately 16-125 times: Data source: LSEG Workspace Generally, the more fearful the market is, the higher the gold-silver ratio, such as in 2020 when the ratio reached a historical high of over 120 times due to the global spread of the COVID-19 pandemic. Last Friday, the gold-silver ratio index was 89.0, up 0.6% week-on-week, down 2.0% year-to-date in 2024 and up 4.7% since 2023. The cumulative increase in 2023 was 14.0%. Silver has underperformed gold for at least two consecutive years, indicating that the market remains highly concerned about risks. It should be noted that both the USD gold price/North American gold mining stock ratio and the gold-silver ratio are showing a clear trend of rebounding from the bottom. Financial markets have clearly entered a cycle of economic downturn trading. The US is expected to maintain its interest rates unchanged in January At the time of writing, the market believed that there was a 99.5% probability that the Federal Reserve would maintain its interest rates unchanged on January 29: Image source: LSEG Workspace The first opportunity to cut interest rates is likely to be between May and July, with a potential second cut in October or December. After a long period of validation, the futures market's predictions of US interest rate trends, especially longer-term expectations, have generally been wrong. Therefore, the author boldly predicts that the number of rate cuts in the US next year will exceed current market expectations, especially if there is a stock market crash next year. It is expected that there will be a confrontation between Trump and the Federal Reserve in 2025, which could lead to volatility in the US dollar, theoretically benefiting gold prices. The outstanding performance of gold prices in 2024 is mainly due to market concerns about geopolitical issues and, more importantly, the belief that the US is entering a rate-cutting cycle, leading to a decline in the opportunity cost of holding gold. The US dollar has been weak and powerless until Trump's victory in the election. Therefore, demand from global central banks and investors has been strong. Based on current technical analysis, gold prices are still strong, and the first quarter may be the best quarter of the year; traditionally, the second and third quarters are weaker for gold, and there may be significant fluctuations and corrections (declines). Recently, gold prices in China have started to rebound above international levels. In the difficult global economic situation over the next four years, buying during periods of weakness in gold prices may be a strategy worth considering. Regarding concerns about the US balance sheet and the US dollar in the market, no president can change the course of history. During Trump's last term, the national debt increased by $7.8 trillion due to tax cuts and the lack of restrictions on other spending, leading to him setting a historical record as the US president with the third largest fiscal deficit growth during his tenure. However, from an investment perspective, fundamentals are not important; what is important is what the market currently believes. The market believes that Trump's election will lead to a rise in the USD, a fall in bond prices, a fall in commodities, and a rise in US stocks and cryptocurrencies. Earlier this year, the author predicted in this column that if Trump was elected, the market might give him a honeymoon period of about half a year, hence the strong performance of US stocks and cryptocurrencies might be sustained until around the end of April next year; but in the metals sector, unless geopolitical tensions heat up again, the short- to medium-term peak may have passed. According to historical statistics, the average return for gold prices in the first year of a US president's term is only slightly over 1%, and the first year of a four-year term is often the worst performance. The biggest challenge in the next 12 to 24 months will be if the US starts cutting interest rates, but inflation pressures rise again, what will the Federal Reserve do? In the scenario where the US begins to cut spending in 2025, US stocks experience a major decline, the Federal Reserve cuts interest rates less than expected, and geopolitical risks escalate, the USD is likely to rise/maintain high levels without much doubt. There may be significant volatility in the global financial markets (downward) in March-May 2025, and it is recommended to gradually reduce holdings of risky assets during these months to secure profits.