To The Moon

If there’s one clear focus in the futures market recently, it’s undoubtedly silver.But today, let’s take a step back from silver and zoom out for a broader perspective: Does the recent surge in gold and silver signal the start of a bull market in base metals?

There’s a well-known commodity cycle that combines the Merrill Lynch Investment Clock with Jeremy Grantham’s concept of the “commodity supercycle launch sequence.” It goes like this:

The early warning sign that an economic downturn is ending is a rise in gold and silver prices. $白银主连 2603(SImain)$
Why? Because during late-stage slowdowns, real demand is weak and industrial commodities languish—so capital flows into safe-haven assets like precious metals.

At the same time, central banks won’t stand by as the economy stalls. To stimulate growth and employment, they typically deploy aggressive monetary easing—most commonly, interest rate cuts.

Once rates start falling, base metals often follow gold higher. Why? Because sectors like infrastructure and manufacturing begin to recover. This price momentum then gradually spreads to crude oil, energy, and agricultural commodities. $白银主连 2603(SImain)$ $美国原油ETF(USO)$ $农产品(000061)$

Take a look at the chart below—it shows how gold and copper performed around major Fed rate cuts in 1995, 2001, 2007, and 2019.

However, we can see that not every rate cut has led to higher base metal prices—especially copper. Aside from its strong performance in 2001, copper actually declined in the other years following initial rate cuts.

That said, a recent JPMorgan research report states plainly:
“Rate cuts are generally bullish for commodities, with an average gain of 3% within nine months after the first cut. The typical pattern often shows a ‘fourth-month’ rally rhythm: prices continue rising in the first month, pull back in months two and three, then regain momentum.”

For example, this exact sequence played out during the rate-cut cycles of 1995 and 2024：

Commodity markets have delivered an average return of as high as 15% following initial rate cuts. However, investors should also note that in the 1998, 2001, and 2019 easing cycles, commodities actually posted declines—averaging around a 16% loss.

Alright, no more suspense. Let’s address the elephant in the room—including copper’s underwhelming performance during past rate-cut cycles.

The key lies in distinguishing between “benign” rate cuts and “recession-driven” rate cuts.
If a rate cut is forced by economic distress—aimed solely at curbing soaring unemployment or urgently reviving GDP—then even falling real rates won’t lift commodity prices. Why? Because commodities are ultimately driven by supply and demand. If factories stay idle and construction halts, lower interest rates alone can’t revive physical demand. In such scenarios, all indicators must yield to recessionary reality.

So before we assume rate cuts automatically benefit commodities, we must first ask: Is this year’s expected easing cycle benign or recessionary?

I believe the global economy, while bumpy, remains on track. Growth still shows resilience. Yes, traditional sectors suffer from structural overcapacity—but demand from emerging markets remains robust, and new industries (like clean energy, EVs, and digital infrastructure) are driving explosive demand for raw materials.

And let’s not forget: the U.S. will host the 2026 FIFA World Cup. Stadiums, transport hubs, and hotels need to be built—meaning manufacturing PMI has solid upside potential. All of this supports stronger commodity demand.

In short: If the Fed cuts rates this cycle, it’s likely a benign easing—and that’s fundamentally bullish for commodities.

Now, let’s assess the current landscape.

In the U.S., the biggest uncertainty revolves around the Fed chair transition. Everyone knows what Trump’s move to issue a criminal subpoena to Powell signaled: his determination to force rate cuts.

The race now centers on “the two Kevins.” Prediction markets are heavily betting on Kevin Warsh, who currently leads in odds. Crucially, Warsh is a staunch defender of Fed independence. He opposes the Fed’s bloated balance sheet and is widely seen as a hawk.

The other candidate, Kevin Hassett, is openly aligned with the Trump administration. If he were appointed, he’d likely prioritize fiscal accommodation—supporting tariff agendas and looser monetary policy to serve political goals.

However, Hassett’s odds remain low. The Senate Banking Committee has already stated it won’t allow direct White House interference in the Fed chair selection. This reaffirms the market’s belief in the Fed’s “sacred” independence—the institution’s willingness to hike rates to fight inflation and protect dollar credibility, even at the cost of growth.

Of course, reducing either Kevin to a single label oversimplifies their views. But one thing is clear: Trump does not want a hawkish Fed right now.

According to multiple leading Chinese brokerages, markets now price in a high probability of a June 2026 rate cut. The logic is straightforward: the Fed must ease—or risk handing Democrats an advantage in the midterm elections. $PP中地美债(03001)$ $GX亚洲美债(03075)$ $华夏20美债(03146)$ $黄金主连 2602(GCmain)$

Moreover, the dollar’s credibility is eroding. Over the past 25 years, its share of global reserves has fallen from 73% to 58%—and in 2025 alone, it dropped another 8 percentage points. JPMorgan client data shows net long positions in U.S. Treasuries are unwinding, while short positioning keeps rising.

This is no longer speculation—it’s an open secret.

Hence, the market isn’t just pricing in a June cut. It’s betting there will be more than one cut in 2026.

Now let’s turn to China.

In fact, the 2025 Government Work Report explicitly set a CPI target of around 2%, signaling a deliberate and cautious response to deflationary pressures. Recent policy messaging has become even clearer: for 2026, the top priority of macroeconomic management is now officially “stabilizing prices”—a strong demonstration of Beijing’s resolve on this front. $摩根史坦利中国A股指数基金(CAF)$ $安联神州A股基金 AT USD(LU1997245177.USD)$

PBOC Governor Pan is known as a policymaker skilled at guiding market expectations. His recent remark at the Financial Street Forum—“exploring mechanisms to provide liquidity to non-bank financial institutions under specific scenarios”—deserves close reading. Regardless of interpretation, the underlying message points to active liquidity support.

Indeed, the data speaks volumes:

• M2 money supply growth has risen to 9.8% year-on-year,

• Social financing has beaten expectations for three consecutive months,

• And the Government Work Report now explicitly states, “resolutely guard against deflation.”

All signs confirm the government’s strong commitment to price stability. Both fiscal and monetary policies are aligning to deliver coordinated stimulus. Against this backdrop, the likelihood of further rate cuts in China is high—after all, M2 doesn’t lie.

Let’s further explain why this is likely a benign rate-cut cycle—primarily from an industrial perspective and through the lens of copper price dynamics.

Last year, global photovoltaic (PV) installations reached 400 GW. This year, the target has been set at over 500 GW.

Grid investment rose 18% year-on-year; new energy vehicle production increased by 30%. This has driven higher demand for metals such as aluminum and copper. As shown in the chart below, electrolytic aluminum costs have declined, while profitability has steadily risen.

On the precious metals front, gold $黄金主连 2602(GCmain)$ $微黄金主连 2602(MGCmain)$ has broken above 2400,and silver toward 90 per ounce (up 140% year-to-date in 2025). The drivers are clear: falling real rates (10-year TIPS yields have dropped from 2.3% to 1.8%), sustained central bank buying (global central banks purchased over 1,000 tonnes net in 2025), and heightened safe-haven demand.

Historically, U.S. Treasuries were investors’ preferred safe-haven asset—not only because they offer better liquidity than gold, but also because they generate interest, whereas gold does not.

As shown in the chart below, central bank demand for gold in 2025 has already surpassed their demand for U.S. Treasuries—and the trend continues to strengthen.

According to the latest Snowball report, global central banks purchased 1,136 tonnes of gold in 2025—a record high—with emerging market central banks accounting for over 60%. This clearly reflects a strategic reallocation in reserve composition.

On the silver side, data from the Silver Institute shows that industrial demand for silver rose by 15% in 2025, with photovoltaic applications now accounting for 52% of total industrial use (up from 45% the previous year).

This point has already been clearly articulated in various reports; I’ll only add this: silver’s rally is structural—first driven by industrial supply and demand fundamentals, and second amplified by short-covering dynamics. Exchanges may raise margin requirements, so we recommend using options for hedging in silver positions. For more details, please refer to other articles in the community.

Market consensus is shifting. The prevailing view used to be “weak Chinese demand,” but Q4 2025 data strongly refutes that: China’s copper consumption grew by 12% year-on-year, reaching a three-year high.

Copper prices closely mirror economic activity because copper is a critical raw material across numerous industries. A stronger copper price signals robust demand and recovering factory operations—which is why it’s nicknamed “Dr. Copper.” $麦克莫兰铜金(FCX)$ $铜矿ETF-Global X(COPX)$ $南方铜业(SCCO)$

Goldman Sachs’ latest research report has revised its stance, stating: “Driven by China’s dual engines of infrastructure and photovoltaics, we now target copper at $9,000 per tonne in 2026.” The report even cites inventory data as evidence: copper stocks in Shanghai’s bonded warehouses have declined for five consecutive months.

The key to understanding this rally lies in one phrase: “structural.”
Silver’s surge stems from a real supply-demand gap, while the follow-through strength in aluminum and copper reflects how price signals propagate through the industrial chain.

According to the latest CFTC positioning data, net non-commercial long positions in silver have reached their highest level since 2022—not driven by retail FOMO, but by sustained institutional accumulation. Data shows that single-week inflows into the silver ETF (AGQ) have already exceeded $100 million—confirming tangible capital deployment.

In December 2025, China’s CPI stood at just 0.3%, and PPI was at -1.2%, yet M2 growth remained elevated at 9.8%—a clear manifestation of the government’s active anti-deflation stance. The Government Work Report explicitly states: “For 2026, the GDP growth target is 5.5%, and the CPI target is 3%.” This demonstrates Beijing’s firm resolve to stabilize prices. Only with stable prices can corporate profits be safeguarded, enabling genuine high-quality development and fostering world-class enterprises aligned with the new productive forces.

Conclusion: I believe both the U.S. and China will cut rates this year, and the likelihood of benign rate cuts is high—precisely because industrial demand remains robust and surging, as previously explained. If the easing cycle is indeed benign, then we can reasonably anticipate a powerful bull wave in commodities. So even if you missed the silver rally, there will still be opportunities to catch up!