Metals and mining stocks continued their upward trajectory on Friday, July 3rd, potentially fueled by US non-farm payroll data that tempered expectations for Federal Reserve interest rate hikes. The Huabao Nonferrous Metals ETF (159876), the largest ETF tracking its underlying index, saw its intraday price surge as much as 3.52%, closing with a gain of 1.45%.
Data from the Shenzhen Stock Exchange revealed the ETF attracted net inflows of 107 million units on the day, following a significant inflow of 109 million yuan just the day prior. This consecutive influx of over a billion units signals active capital deployment into the cyclical sector.
Among the ETF's constituents, leading gold stocks were standout performers. Western Region Gold, Chifeng Gold, and Shanjin International all hit their daily price limit, while Shandong Gold rose over 7%. Copper industry leaders also delivered strong results, with Western Mining gaining more than 6% and Zijin Mining Group advancing over 6%. Other gainers included rare earth leader China Rare Earth Group and aluminum producer Shenhuo Shares.
Macroeconomic Backdrop
On the macroeconomic front, the US added only 57,000 jobs in June, significantly missing market expectations. The weak employment data directly cooled market bets on further rate hikes. Concurrently, the US dollar index and short-term Treasury yields retreated. This combination of exhausted negative catalysts and a need for valuation repair has propelled a strong recovery in non-interest-bearing precious metals like gold.
A recent report from Goldman Sachs noted that comments from official Wash signaled a dovish tilt, indicating that both inflation expectations and risks have declined since the June FOMC meeting. The firm anticipates the Federal Reserve will maintain the federal funds rate unchanged for the remainder of 2026.
Key Drivers Across Metal Subsectors
Looking across the various segments within the nonferrous metals sector, each presents distinct, supportive investment theses contributing to a broader positive trend.
Regarding gold, one institution posits that US inflation is likely to decline significantly in the second half of the year. This combination of falling inflation and weakening growth is expected to erode tightening expectations, paving the way for a potential shift back to a more accommodative Fed policy. It suggests the gold bull market is not over and a turning point may be near, with the Fed's hawkish narrative potentially reversing quickly in July-August.
For copper, analysis from another securities firm suggests August-September could be a key window for a recovery in undervalued copper stocks. It argues that copper equities are currently in a phase characterized by low P/E ratios, resilient EPS, and an unrefuted commodity thesis. While the market continues to price these stocks based on a past decade's macro-driven valuation framework, the current metals cycle is being driven by earnings per share (EPS). The revaluation of copper sector profitability and resource value is seen as ongoing, with a high probability of strong price catalysts emerging around the fourth quarter.
In the rare earths space, a report from CITIC Securities highlights a confluence of supply-demand dynamics and technological advancements driving a timely revaluation. The average price of praseodymium-neodymium oxide in the first half of 2026 was 731,000 yuan per ton, a year-on-year increase of 73.6%. On the supply side, the enforcement of domestic rare earth management policies is tightening, leading to a persistently constrained supply. Demand-wise, production of new energy vehicles and robots is increasing sequentially, and export orders are showing strong growth, suggesting sustained demand expansion for rare earths. From 2026 onward, the global rare earth supply-demand deficit is expected to widen continuously, providing long-term support for prices and underscoring the strategic allocation value of the rare earths industry chain.
Huatai Securities points out that the nonferrous metals sector currently trades at a relative valuation near historical lows, presenting a high risk-reward profile. Concurrently, CITIC Securities believes a significant shift in the external environment could pave the way for a rebound in the metals sector, which was among the hardest hit previously. Coupled with expectations for mid-year financial reports, the potential duration and strength of this rebound could exceed those of past cycles.
Investment Vehicle for the Metals Trend
The Huabao Nonferrous Metals ETF (159876) and its feeder funds (Class A: 017140, Class C: 017141) track an index that comprehensively covers industries including copper, aluminum, gold, rare earths, lithium, tungsten, molybdenum, and tin. This broad, all-category coverage allows for better capture of the sector's overall beta movements. Additionally, the ETF is eligible for margin trading and securities lending, serving as an efficient tool for gaining exposure to the nonferrous metals sector.
As of the end of June, the Huabao Nonferrous Metals ETF (159876) had a latest net asset value of approximately 1.345 billion yuan, making it the largest ETF among the three products tracking the same underlying index in the market.
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