CITIC Securities: Still maintaining an optimistic outlook on precious metals and non-ferrous metal prices

CITIC Securities Research Report points out that recent gold prices have experienced significant volatility. From a fundamental perspective, we believe this is driven by changing market concerns over the Federal Reserve’s independence and expectations regarding Iran’s situation, which caused gold prices to rise rapidly first and then fluctuate sharply downward. Speculative funds in the market have also amplified this trend. Looking at the short-term market, we think investors may have overestimated the hawkish stance of new Federal Reserve Chair Kevin Woor, but the uncertainty surrounding Iran remains high, and it may take time for the situation to settle before gold market volatility subsides. Looking ahead to the full year of 2026, we maintain an optimistic outlook on precious metals and non-ferrous metal prices.

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Major Asset Classes | How to View the Gold Market After Large Fluctuations

Recently, gold prices have experienced significant volatility. From a fundamental perspective, we believe this is mainly due to two factors: concerns over the Federal Reserve’s independence and the situation in Iran.

In 2025, London spot gold closed around $4,300 per ounce, achieving a substantial increase for the year. However, in January 2026, gold prices continued to accelerate upward, with London gold reaching nearly $5,600 per ounce. After peaking on January 29, prices began to fluctuate sharply downward. Other precious metals also started to decline. We believe that this pattern of sharp rise followed by sharp decline is driven by two fundamental factors: changing concerns over the Federal Reserve’s independence and developments in Iran.

According to reports from media outlets such as Cailian News and others, starting in January 2026, the Trump administration launched a judicial investigation into Federal Reserve Chair Powell, directly linking it to political pressure from the Trump administration on the Fed.

Market concerns over Fed independence increased. However, these concerns weakened significantly after Trump nominated Kevin Woor as the next Fed Chair. Additionally, in January 2026, geopolitical tensions in Iran escalated. Media reports from outlets like Observer Network indicate that the U.S. military was massing near Iran. But by the end of January 2026, news emerged of negotiations between Iran and the U.S.

From a capital perspective, higher participation of speculative funds has amplified price fluctuations.

According to data from the World Gold Council, during the week when gold prices peaked and then declined in late January 2026, global gold ETF holdings increased to a high level, with the highest proportion of ETF inflows coming from the Asia-Pacific region. This typically represents the last influx of funds in a gold bull market. Additionally, the volatility of gold prices gradually increased during the upward movement in January 2026. The influx of short-term speculative funds led to a large rise in gold prices in January, but overly concentrated funds also created a fragile market structure. As fundamental bullish factors weakened, prices of gold and some other assets experienced sharp fluctuations and declines.

Regarding Federal Reserve policy outlook, market expectations for Kevin Woor may be overly pessimistic.

The newly nominated Fed Chair Kevin Woor previously supported balance sheet reduction, which eased concerns about Fed independence. However, it also raised fears of excessive tightening of monetary policy. We believe that the current U.S. fiscal debt and budget balance do not support aggressive quantitative tightening policies under Woor. Woor’s support for rate cuts could still materialize in 2026. The market may be overly pessimistic about Fed policy prospects.

On geopolitical risks, once the situation in Iran becomes clearer, market volatility may ease.

According to Global Times, recent negotiations between Iran and the U.S. have begun, and market expectations for Iran have cooled. However, we believe negotiations will be difficult. Reviewing the history of Iran-U.S. talks, there is little consensus on core issues. On the other hand, the Trump administration needs limited external conflicts to stabilize voter and supporter backing. Currently, the large U.S. military buildup near Iran suggests a “ready to strike” posture. We believe that once the Iran conflict’s outcome is settled, significant fluctuations in the gold market may subside.

We remain optimistic about gold prices for the full year of 2026, but we also need to monitor recent trade and economic tensions.

Since 2026, the Trump administration has repeatedly exceeded market expectations in domestic and foreign policies. Driven by midterm elections, policies and geopolitical uncertainties caused by the Trump administration may remain high. We believe an optimistic outlook for the gold market is still justified. Other precious metals are also expected to perform positively. However, attention should be paid to future trade policy developments. According to CCTV News, on February 4, 2026, U.S. and China leaders had a phone call. Additionally, according to Shangyou News, after the call, Trump stated he would visit China in April 2026. If Trump visits China, there could be positive progress in China-U.S. trade relations, which might temporarily pressure gold prices downward. However, since market expectations for improved China-U.S. trade relations are already high, this does not alter our overall optimistic outlook for gold throughout 2026.

Beyond gold and precious metals, we believe that the bull market in other non-ferrous metals in 2026 is also worth期待。

As the gold market’s bull run continues, optimism in precious metals may spread to non-ferrous metals, supporting a continued bull market in that sector. If leading indicators for infrastructure and manufacturing in China and the U.S. improve in 2026, the performance of non-ferrous metals could be even better.

Risk Factors:

Geopolitical risks, global central bank gold purchases falling short of expectations, Fed easing falling short, U.S. fiscal deficit below expectations, U.S. economic growth exceeding forecasts.

(Source: Cailian News)