Summary of Institutional Views on Financial Markets on January 12

On January 12, institutions summarized their views on commodities, foreign exchange, central bank policy and economic outlook:



1. Goldman Sachs raised its 12-month target prices for aluminum, copper and zinc;

① Goldman Sachs raised its 12-month target prices for aluminum, copper and zinc as risks weaken and inventories are severely depleted, leading to pricing of base metals should be based on scarcity. Goldman analysts including Nicholas Snowdon raised their 12-month price targets for aluminium, copper and zinc to $3,500/ton, $12,000/ton and $4,000/ton, respectively, in a note to clients. Goldman Sachs kept its 12-month nickel price target unchanged at $24,000/ton;
② Goldman Sachs analysts expect a shortage of all refined metals now, reflecting a combination of factors such as strong demand in developed markets. In addition, an inflationary environment from energy and agricultural products to wages has kept base metals largely immune to the start of monetary tightening by the Federal Reserve. Analysts also said the global energy crisis has impacted metal supplies, with recent cuts in European smelters pushing the supply-demand mix of aluminum and zinc toward a copper shortage this year. With supply showing no signs of increasing, the structural bull market in metals is accelerating. Peak supplies of copper, aluminium and zinc are fast approaching, with little news of increased investment on the supply side

2. HSBC lowered its 2022 gold price forecast due to global economic growth and rising yields;

① HSBC chief precious metals analyst James Steel said the 2022 gold price forecast was lowered to $1,723 an ounce, as above-trend global economic growth and rising yields are weakening gold’s safe-haven demand. The bank's previous gold price forecast was $1,740 an ounce;
② Steel said in a report that rising inflation has boosted retail demand, but institutional investors are still reluctant to increase their holdings. ETF outflows reflect a shift in investor attitudes toward gold, but may be stabilizing. A bottom is "near" for gold prices as inflation-adjusted interest rates will remain negative and a possible rise in trade and geopolitical risks helps gold.
③ Financial market instability due to rising asset prices may also trigger demand for gold. The bank kept its 2023 and long-term gold price forecast unchanged at $1,715 and $1,600, respectively. Gold is expected to average $1,675 in 2024

3. Pepperstone: Powell gives hope to gold bulls in Q1 2022, eyeing $1,830;
①Pepperstone foreign exchange trading platform (Pepperstone) said that after the nomination testimony of Federal Reserve Chairman Powell triggered a rise in gold prices, there was optimism in the gold market;
② The key level to watch now is $1,830 an ounce, and gold bulls are currently hopeful about the direction of gold prices in the first quarter

4. Invesco Great Wall: Lithium battery supply shortcomings will still exist in 2022;
①Invesco Great Wall science and technology research team mentioned at the press conference of the new energy vehicle insight report that the supply shortcomings of the lithium battery industry will still exist in 2022, especially the diaphragm, lithium resources, PVDF, copper foil are limited by resources or equipment, and will still be maintain a tight balance;
② But the stage of tight supply in the industrial chain will eventually pass, and the main line of investment that should be paid more attention is new technologies and new directions to solve the pain points of battery life and charging, such as 4680 batteries in fast charging technology, single-wall carbon nanotubes, and 800V high-voltage systems. Application promotion, and technical directions such as CTP, blade soft-packed iron-lithium battery, and advanced thermal management in terms of battery life

5. Wood Mackenzie: The pandemic has halted the long-term downward trend in the cost of renewable energy;

① Research and consulting firm Wood Mackenzie said the trend of falling renewable energy prices stopped last year, but should resume when the supply chain strain caused by the epidemic eases. The average cost of new solar power in Asia (as measured by the life cycle cost of a power plant) rose by 9.0%, and the average cost of onshore wind power rose by 2.0%. This appears to be a setback in the adoption of renewable energy, but the cost of generating electricity from coal and natural gas has risen even more;
② Currently, the average cost of renewable energy in Asia is about 16% higher than fossil fuels over the life of a project, but could be 28% lower than coal by 2030

6. Standard Chartered: The oil market will be in short supply in 2024-26, and the average price of Brent will exceed $100 in 2026;

① According to the report of Standard Chartered, starting from 2024, the oil market will shift from abundant supply to tight supply, and the average price of Brent crude oil will exceed US$100/barrel in 2026. 2023-2026, the daily increase in demand is expected to be 5.2 million barrels per day, all from non-OECD countries;
② It is expected that the supply and demand prospects in the second half of 2022 and 2023 will be more balanced, and supply constraints will start to appear long after entering 2024; OPEC is expected to produce an average daily average of 28.4 million barrels per day in 2023, a decrease of 1.4 million barrels from 2019. /day;
③ If Iranian crude oil returns to the market before 2024, there is little room for other OPEC countries to increase production; non-OPEC supply growth decelerates sharply, from 2.4 million bpd in 2022 to 300,000 bpd in 2026; Spare capacity will become tight in 2025 and 2026; based on December production levels, excluding Iran, Libya and Venezuela, OPEC+ spare capacity currently stands at 5.3 million bpd.
④ Brent Price Prediction:
2022: From $67 to $75 per barrel;
2023: From $60 to $77;
2024: from $63 to $83;
2025: From $65 to $89;
2026: From $64 to $108

7. Mizuho Securities: WTI oil prices between $75 and $85 per barrel are reasonable if inventories plummet;
Bob Yawger, head of futures at Mizuho Securities U.S., said inventories have been declining for several weeks, and as long as this continues, the market will continue to buy, and if inventories drop significantly, then we will be at the lowest level since 2018, which will be Justifying WTI oil trading between $75 and $85 a barrel

8. Moody's: The Fed is expected to raise interest rates three times in 2022;

① Moody's said that the recovery of the labor market supports the US's GDP growth prospects and monetary policy normalization ② Currently, the United States is expected to raise interest rates three times this year, and in November last year, it was expected that there would be no interest rate hikes until 2023;
③ The impact of the Omicron variant on the economy may be temporary, so the process of raising interest rates may accelerate; inflation pressure will ease, but may remain high for a longer period of time

9. JPMorgan Chase: The Bank of Canada will raise interest rates for the first time in January, raising interest rates 5 times in total throughout the year;

① JPMorgan has adjusted its outlook for the policy tightening cycle of the Bank of Canada, and now expects the first rate hike this year to be in January, earlier than the previous forecast in April. JPMorgan economist Silvana Dimino wrote in a note that five rate hikes are expected throughout 2022, with a cumulative increase of 1.5 percentage points in policy rates by the end of the year;
② JPMorgan Chase also expects the central bank's balance sheet to shrink moderately in the second half of the year, but it is not expected to sell assets on the balance sheet in 2022; the money market fully digested the expectation of a rate hike at the March meeting and considered the possibility of a rate hike in January more than 50%; based on comments from the Bank of Canada in December, it is clear that labor market dynamics and strong economic data have made the bank more concerned that the output gap is narrowing faster than expected; we expect coronavirus-related disruptions and Any hit to confidence will be short-lived; case growth appears to be slowing

10. Rabobank: How long the Fed's hawkish stance will last remains doubtful;

① Research analysts at Rabobank said that at the confirmation hearing of Powell (re-elected Fed chairman) by the U.S. Senate Banking Committee, inflation was the top issue, and it was clear that Powell dropped the tentative statement in time. Powell wants to prevent higher inflation from becoming entrenched, which means the Fed is eager to start raising rates and will start shrinking its balance sheet;
②However, how far the Fed will remain hawkish remains a question if inflation (in line with Fed expectations) falls later this year

11. TD Securities: The market focuses on the US CPI and the downward resistance in Europe and the United States around 1.14;

① US CPI data will be a key focus, and our forecast is in line with the market. Nonetheless, we believe that the market's reaction mechanism is asymmetric. That is to say, with the market reasonably pricing the Fed's hawkish tone, a weaker-than-expected CPI could tactically further weaken the dollar and support risks;
②We think investors will still face an uphill battle at the beginning of the year. We are closely watching the downside resistance in Europe and the US around 1.14. Chairman Powell's testimony continued to suggest that the Fed will remain more aggressive about the timing and pace of rate hikes and balance sheet reductions. The Fed is expected to raise interest rates in March, and begin to shrink its balance sheet in September

12. The World Bank lowered its forecast for global economic growth in 2022 to 4.1%;

① The World Bank released the latest "Global Economic Outlook" report on the 11th, predicting that the global economy will grow by 5.5% in 2021 and 4.1% in 2022, both down 0.2 percentage points from the previous forecast. The report said that due to the continuous spread of the new crown epidemic, the reduction of policy support in various economies and the persistence of supply chain bottlenecks, the momentum of the global economic recovery will slow down significantly, and the output of emerging market and developing economies is expected to remain significantly lower than the epidemic. front level;
② The report predicts that developed economies will grow by 5% in 2021 and 3.8% in 2022, down 0.4 and 0.2 percentage points respectively; emerging market and developing economies will grow by 6.3% in 2021 and 4.6% in 2022. The World Bank predicts that the U.S. economy will grow by 5.6% in 2021, down 1.2 percentage points from its previous forecast; in 2022, it will grow by 3.7%, down 0.5 percentage points. The euro zone economy will grow by 5.2% in 2021 and 4.2% in 2022. At the same time, the World Bank expects China's economy to grow by 8% in 2021 and 5.1% in 2022;
③ The report pointed out that the global economy faces many downside risks, including the rapid spread of the mutated new coronavirus Omicron strain, leading to a resurgence of the epidemic, soaring inflation expectations, and financial pressure from record high debt levels. At the same time, climate change could exacerbate commodity price volatility, posing challenges to emerging market and developing economies. Given the limited policy space in emerging market and developing economies, the above-mentioned downside risks will "increase the likelihood of a hard landing" (Xinhuanet)

13. Scotiabank said that if the pound against the Canadian dollar is stable above 1.7085, it will be bullish in the future;

①According to Scotiabank's technical analysis, GBP/CAD's rebound from the lows in early December stalled at the beginning of the week, but if the exchange rate holds above 1.7085, the outlook remains positive;
② GBP/CAD benefited from the strong recovery of the UK economy for most of December, but GBP/CAD fell back below 1.72 this week after a choppy start to the new year and briefly rose above 1.73 last Thursday