China Galaxy Securities (CGS) released a research report noting that recent dovish remarks by New York Fed President John Williams, who stated that "downside risks to employment have increased while upside risks to inflation have diminished, leaving room for further adjustments to the federal funds rate target range in the near term," coupled with weak underlying trends in the labor market as indicated by nonfarm payroll data, have reignited market expectations of a Fed rate cut in December.
Additionally, over the weekend, the China Smelters Purchase Team (CSPT) reached a consensus to reduce mined copper capacity by over 10% in 2026, improving the supply-demand fundamentals for copper concentrate. If smelting cuts materialize, refined copper supply in 2026 could tighten further, driving copper prices higher.
Key takeaways from China Galaxy Securities’ report include: 1. **Fed Rate Cut Expectations**: Following Williams’ comments and the soft September nonfarm payroll report, market pricing now reflects an over 80% probability of a December Fed rate cut, boosting gold prices and sending silver to record highs. With the Fed likely to shift from quantitative tightening to expansion by year-end amid liquidity pressures, marginal easing could further lift precious metals prices. Stocks to watch include Chifeng Gold (600988.SH), Zhongjin Gold (600489.SH), Shandong Gold Mining (600547.SH), and Xingye Silver & Tin (000426.SZ).
2. **Copper Market Dynamics**: Frequent disruptions at major global copper mines this year have led to downward revisions in production forecasts, with 2026 output remaining highly uncertain. Against this backdrop, Codelco—the world’s largest copper producer—proposed a 2026 refined copper contract premium of $335–350/ton to Chinese smelters, a 275% surge from 2025’s $89/ton, intensifying miner-smelter tensions. The CSPT’s decision to cut capacity could accelerate refined copper shortages if smelters reduce output, further fueling price gains.
3. **Additional Catalysts**: Potential U.S. tariffs on copper, inventory distortions due to "siphoning effects," low stockpiles outside the U.S., and anticipated Fed liquidity injections in Q4 may sustain copper’s rally. Recommended stocks include Zijin Mining (601899.SH), CMOC Group (603993.SH), and Tongling Nonferrous Metals (000630.SZ).
**Risks**: 1) Slower-than-expected domestic economic recovery; 2) Fed delaying rate cuts; 3) Sharp declines in nonferrous metal prices; 4) Escalating U.S.-China tariff tensions.
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