The U.S. Treasury market has been experiencing significant volatility recently, with 10-year and 30-year yields touching highs of 4.7% and 5.3%, respectively. This spike triggered a selloff in global technology stocks, as the Nasdaq and the Philadelphia Semiconductor Index fell 1.3% and 5.0% on August 18.
On August 19, the U.S. Treasury Department announced an increase in long-dated debt buybacks, which briefly drove long-term yields lower. However, this effect proved short-lived. Despite Treasury Secretary Bessent's renewed signals about potentially expanding the scale of long-bond repurchases, the market remained unconvinced. Growing concerns that the Treasury may struggle to stabilize the situation have led some to view these actions as a form of "financial repression"鈥攁n administrative intervention in interest rates that could undermine the credibility and stability of U.S. debt, prompting continued selling.
Throughout this process, U.S. equities have held up relatively well, but the U.S. dollar has emerged as the biggest loser. Gold, acting as a dollar alternative, has surged instead. This suggests the core issue may not lie in corporate earnings fundamentals or even U.S. Treasury fundamentals like real rates or rate-hike expectations, but rather in the willingness to hold U.S. debt, which in turn reflects on the dollar's standing.
CICC believes the current U.S. Treasury situation is not necessarily heading toward a crisis. However, until the debt issue is resolved, U.S. bonds and the dollar are likely to remain relatively weak while gold benefits, creating a mirror-image dynamic. Investors may therefore consider using gold or related positions to hedge against potential volatility. Should severe market turbulence occur, it would actually increase the probability of the Federal Reserve providing emergency liquidity support, meaning such volatility often presents better entry opportunities.
On a static basis, the current gold price of $4,600 per ounce broadly corresponds to a level supported by a dollar index around 98-99 and a real interest rate of 2.4%. Yet historically, major gold rallies have always been driven by grand crisis narratives. As it stands, gold's downside appears relatively well-supported amid declining rate-hike risks, while its upside potential stems from growing distrust of dollar-denominated assets and other larger narratives. Holding gold can therefore serve both as a hedge against volatility and as a bet on potential narrative escalation.
According to Hwabao Fund's Index Investment Department, Bessent's expanded long-bond buyback intervention last week was limited in actual scale but sent a strong easing signal. This has pushed long-end real rates lower and weakened the dollar, both of which are significantly positive for gold. Domestically, China's Ministry of Finance has stated that it will continue to research and introduce new coordinated fiscal and financial policies in the second half of the year, with already-implemented measures including broadening the scope of interest subsidies, increasing the number of agency institutions, and raising quota ceilings.
Over the medium to long term, global structural factors are reshaping the landscape. The technology cycle and supply uncertainties are expected to lift the pricing center for non-ferrous metals. In the spot market, London gold prices have successively broken through the $4,400, $4,500, and $4,600 per ounce levels, posting a weekly gain of 5.18% and recording a third consecutive weekly advance. COMEX gold futures peaked at $4,690 per ounce, representing a rebound of more than 16% from the July low of $4,022 per ounce.
Meanwhile, the A-share market is entering its interim reporting season, with several mining companies delivering impressive profit growth. Data shows that as of August 23, among the 60 constituent stocks of the Nonferrous Metals ETF (159876), 26 listed companies have disclosed their 2026 interim results, and all reported profitability. In terms of net profit attributable to shareholders, Zijin Mining and Luoyang Molybdenum lead with 39.17 billion yuan and 16.152 billion yuan, respectively, boosting sector sentiment. Notably, 10 stocks recorded triple-digit year-on-year growth in attributable net profit. As a sector that previously delivered strong earnings previews, non-ferrous metals continue to attract market attention.
Looking ahead, Hwabao Fund believes that the leadership momentum from gold is likely to spill over to other metals, positioning the non-ferrous metals sector for medium-to-long-term allocation value. In the near term, gold's leading role within the sector is expected to gradually transmit to industrial metals and minor metals, potentially opening up further upside. Over the longer term, the sector combines three core advantages: tight supply-demand dynamics, valuations at historically low levels, and clear demand drivers from long-term technology industry trends. This makes the sector a compelling candidate for right-side allocation.
Different non-ferrous metals have varying levels of prosperity, pacing, and growth drivers, so differentiation is inevitable. For those bullish on the sector, a straightforward approach is full coverage to capture the overall beta. The Nonferrous Metals ETF (159876) and its feeder funds (Class A: 017140, Class C: 017141) track an index that comprehensively covers copper, aluminum, rare earths, gold, lithium, tungsten, molybdenum, and tin. With full coverage across precious metals, industrial metals, energy metals, and strategic minor metals, the fund captures the sector's beta. Key holdings include industry leaders such as Zijin Mining, Luoyang Molybdenum, Northern Rare Earth, Aluminum Corporation of China, and Zhongjin Gold. Additionally, the ETF is a margin trading and securities lending target, making it an efficient tool for one-click exposure to the non-ferrous metals sector.
Data source: Shanghai and Shenzhen stock exchanges, as of August 24, 2026. Institutional views referenced from CICC's August 24 report "Where Does the U.S. Treasury Problem Lie?"
Note on "low valuation": From a valuation perspective, the current non-ferrous metals sector is not expensive horizontally, is not overvalued vertically, and trades at a discount relative to overseas peers, offering a strong margin of safety. First, in cross-industry comparison within the Shenwan first-level industries, the sector's PE (TTM) ranks in the middle-to-lower range, with significantly less valuation pressure than most other sectors. Second, viewed historically, the CSI Nonferrous Metals Index PE sits near its three-year median, without significantly front-running future growth expectations. Third, in an international comparison, A-share Zijin Mining is clearly valued lower than U.S.-listed Southern Copper, highlighting a notable global pricing discount for A-share non-ferrous leaders.
Disclaimer: All individual stocks mentioned are constituents of the Nonferrous Metals ETF (159876) target index. As of end-July, their weightings were: Zijin Mining, 11.93%; Luoyang Molybdenum, 7.97%; Northern Rare Earth, 4.70%; Aluminum Corporation of China, 3.55%; Zhongjin Gold, 3.13%. Index constituents are shown for illustrative purposes only, and individual stock descriptions do not constitute investment advice of any form, nor do they represent the holdings or trading activities of any fund under the manager. For ETF fees: when subscribing or redeeming fund shares, authorized dealers may charge commissions of up to 0.5%. On-exchange trading fees are subject to actual brokerage charges. The ETF does not charge sales service fees. For feeder fund fees: Hwabao CSI Nonferrous Metals Feeder Fund (Class A) charges a subscription fee of 1% for amounts below 1 million yuan, 0.6% for amounts between 1 million and 2 million yuan, and 1,000 yuan per transaction for amounts of 2 million yuan and above. Redemption fees are 1.5% for holdings under 7 days and 0% for holdings of 7 days or more, with no sales service fee. Class C shares charge no subscription fee, with redemption fees of 1.5% for holdings under 7 days and 0% for holdings of 7 days or more, plus a sales service fee of 0.3%. Risk disclosure: The Nonferrous Metals ETF passively tracks the CSI Nonferrous Metals Index, with a base date of December 31, 2013, and a launch date of July 13, 2015. Index constituent composition adjusts according to index methodology, and backtested historical performance does not indicate future index performance. The fund manager assesses the fund's risk level as R3-medium risk, suitable for balanced (C3) and above investors. Suitability opinions are subject to sales institutions. Any information in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, and any forms of expression) is for reference only. Investors are solely responsible for their own investment decisions. Furthermore, any views, analyses, or forecasts herein do not constitute investment advice to readers and shall not be held liable for any direct or indirect losses arising from the use of this content. Fund investment carries risks. Past performance does not represent future performance. The performance of other funds managed by the fund manager does not constitute a guarantee of fund performance. Please invest cautiously.
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