After a strong start, the price of gold slipped twice to around $5,060 during this trading week. Now, it appears that gold prices might manage to stay just above $5,100 heading into the weekend, continuing the persistent sideways movement of the past five weeks.

(Kitco Commentary) - Gold slipped on Thursday as a record coordinated oil reserve release from the International Energy Agency introduced a note of policy resolve into markets that had been pricing in unmitigated supply chaos.

[SMM Aluminum Weekly Review: Macro Sentiment Remains Lackluster, Aluminum Prices in the Doldrums]

[Price Review] Driven by CME’s seven consecutive emergency margin hikes on silver futures to 18%, a liquidity squeeze and exchange-mandated cooling measures together steered the overheated silver price back to earth. This week the silver market moved sideways after wild swings. On the SHFE side, the exchange released on Wednesday the “Automatic Conversion Standard for Hedging Position Quotas”; although the TD price on the SGE did not narrow versus the SHFE silver 2602 contract, the backwardation structure of the SHFE calendar spread kept converging and the risk of a speculative short squeeze declined. This week the SGE deferred-fee direction again stayed “short pays long”, and traders holding longs still found it hard to pick up physical metal through SGE delivery. As for the gold/silver ratio, silver’s plunge far outpaced gold’s, sending the ratio from the prior 47× low to near the 70 handle, a two-and-a-half-month high, showing silver’s volatility during deleveraging was markedly above gold’s. By 12 February, as silver rebounded, the ratio pulled back to roughly 60×; with short-term speculative money out, the ratio is expected to consolidate in a range. [Key Data] Bullish: US Dec retail sales m/m 0%, below both prior and expectations Bearish: US Jan unemployment 4.3%, below prior and expectations US Jan seasonally adjusted non-farm payrolls 130,000, above prior and expectations US week to 6 Feb EIA crude inventory: 8.53 million barrels, above prior and expectations Data and macro headlines to watch next week include: This Friday the US will release the Jan non-farm payrolls and unemployment, but note the BLS has warned the report could be delayed due to the partial government shutdown. Several Fed officials will speak, including Atlanta Fed President Bostic on the economic outlook. [Price Forecast] Domestic markets entered a holiday lull this week. Overseas liquidity over the holiday left short-term speculative money cautious about re-entering silver, awaiting either the full deflation of price froth or the removal of margin-hike risk controls. Post-holiday silver is expected to search for a new equilibrium after the wild swings. A possibly soft US data set this week and lingering worries over Fed independence have weakened the US dollar index, briefly lifting precious metals. Although supply-demand fundamentals still lend medium- and long-term support, sentiment-driven spikes and the ever-present threat of rapid pullbacks keep silver in a high-risk, high-volatility environment. Overall, post-holiday silver is likely to hover at highs; stay alert to liquidity risk amid elevated volatility. 》Check SMM precious-metals spot quotes

SMM Feb. 12: Macro perspective, domestic macro sentiment was generally positive, while overseas expectations for interest rate cuts pulled back. Domestically, the National Bureau of Statistics (NBS) reported that China's CPI rose 0.2% MoM and PPI rose 0.4% MoM in January, easing deflationary pressure. Overseas, US non-farm payrolls increased by 130,000 in January, the unemployment rate fell to 4.3%, and annual figures were revised down by 862,000. The market faced a contradiction between strong single-month data and downward historical revisions, pushing expectations for rate cuts to the second half of the year. US Fed officials struck a hawkish tone, favoring maintaining restrictive interest rates, while Trump continued to pressure the Fed. Fundamentals, supply side: Domestically, aluminum projects in China and Indonesia steadily ramped up production, but overall February production pulled back MoM from January due to fewer calendar days. Domestically, with the Chinese New Year approaching, downstream demand for raw materials weakened marginally. Combined with high aluminum prices suppressing demand, downstream demand softened further, and enterprises' willingness for casting ingot increased significantly, lowering the proportion of liquid aluminum in February. Although warehouse withdrawals of aluminum ingot in major consumption areas increased YoY this week, social inventory built up by about 35,000 mt WoY from last Thursday. Overall, bullish sentiment in the nonferrous metals market cooled, and coupled with high inventory pressure fundamentals, aluminum prices remained in the doldrums this week. Affected by the approaching delivery date, the SMM A00 aluminum premiums and discounts were reported at -160 yuan/mt this Thursday, narrowing by about 20 yuan/mt from the previous trading day. Macro sentiment still lacked clear improvement, and high inventory continued to weigh on prices. SHFE aluminum is expected to remain in the doldrums after the Chinese New Year, trading in the range of 22,800–24,000 yuan/mt. LME aluminum is expected to trade between $3,080/mt and $3,180/mt. In addition, be alert to the potential impact of rising alumina prices on aluminum prices after the holiday.

At 20:30 Beijing time on Wednesday, the US Bureau of Labor Statistics will release the May Consumer Price Index (CPI) report. People will closely monitor these data to see if US President Trump's tariffs are beginning to impact consumer prices. Chicago Fed President Austan Goolsbee has warned that April's inflation report may represent the last calm before tariffs lead to a rise in inflation. The median forecast from economists indicates that the overall US CPI for May is expected to maintain a MoM growth rate of 0.2%, with the YoY growth rate rising from the four-year low of 2.3% touched last month to 2.5%. For the core CPI, which excludes the more volatile food and energy categories, the MoM growth rate is expected to increase from 0.2% in April to 0.3%, while the YoY growth rate is projected to rise from 2.8% to 2.9%, reversing the downward trend seen so far this year. Forecasters suggest that core inflation in the US may rebound in May, reflecting the mild impact of tariffs being passed on to major imported goods, while prices for some services, such as airfares, are expected to narrow their gains or fall outright. Samuel Tombs and Oliver Allen, economists at Pantheon Macroeconomics, noted in a report: "Only a handful of goods prices are likely to rise in May due to new tariffs—June will be different—while some non-essential service providers may cut or maintain low prices to support demand." Rising Goods Inflation, Weakening Service Prices Economists have been closely watching how tariff costs will be passed on to consumers. As of April, the CPI report showed minimal impact, as firms absorbed some of the costs and relied on inventories purchased before the tax increases. However, companies, including Walmart, have indicated they will begin raising prices for some goods. Bank of America economists Stephen Juneau and Jeseo Park stated in a report that the impact of tariffs on May's data should be broader than in April. The most obvious sign of tariff-driven price increases in April was the 8.8% MoM surge in audio equipment prices. Other notable categories include heavily taxed goods such as clothing, new cars, and household appliances. Wells Fargo economists Sarah House and Nicole Cervi pointed out: "Inventory accumulation ahead of the tax increases and expectations of potential reductions in the current tariff scale have so far curbed cost increases. However, as high tariffs persist, it may become more challenging to shield consumers from cost shocks." On the other hand, forecasters have pointed out that disinflation in the services category may have curbed the overall CPI increase . Andrew Schneider of BNP Paribas said that airfare and hotel prices have remained sluggish in recent months, and deflation is expected in both categories in May. In his report, he noted that the decline in foreign tourists may have contributed to the price weakness. Anna Wong, a strategist at Bloomberg Economics, believes that the price drops in some service categories reflect consumers cutting back on non-essential spending. She also expects airfares to decline. "Both consumers and government departments are cutting back on travel spending this year, and airfares continued to deflate in May," Wong wrote in her report. How many more months will the US Fed have to wait? Economists and US Fed officials have differing views on when the impact of tariffs on inflation will fully materialize. Goldman Sachs expects tariffs to push up commodity prices and overall inflation in the coming months, but this increase will be one-off, after which prices will return to normal. In the May CPI data, the institution expects the impact to be relatively small, with core inflation projected to rise 0.05% to 0.25% MoM. Looking ahead, Goldman Sachs expects core inflation to reach 3.5%, up from 2.8% in April, but with easing pressures in the labour market, housing, and automotive sectors. The institution also expects hotel and airfare prices to remain flat in the short term, with most inflation coming from goods rather than services. Other perspectives suggest that companies may not raise prices until surplus inventories are digested. Due to the inventory surplus before April, it may take several more months to digest inventories. According to information as of May 23, the US Fed's latest Beige Book shows that companies planning to pass on tariff-related costs expect to achieve this goal within three months . Debates on the inflation outlook have also taken place within the US Fed. Minneapolis Fed President Neel Kashkari said that the Federal Open Market Committee (FOMC) had a useful debate on whether to view price-related increases through the lens of tariffs, and he found the argument against ignoring the impact of tariffs on inflation more compelling. Several others, including US Fed Governor Adriana Kugler, seem to agree with this view. Kugler noted that the impact of tariffs on prices may be more persistent. Atlanta Fed President Raphael Bostic has said he is particularly concerned about inflation and the public's expectations for future price increases, believing that "it will take three to six months to see how things unfold."Goolsbee, however, expressed some "trepidation" about the claim that tariffs would have a temporary impact on inflation. On the other side of the argument was Fed Governor Waller, who believed that tariffs would lead to a one-time increase in prices and stated that it was standard practice for central banks to overlook one-time price hikes. Fed Chairman Powell and his colleagues have indicated that there is time to assess the impact of trade policies on the economy, inflation, and the job market. The market widely expects the Fed to keep interest rates unchanged at its meeting next week. The recent strong non-farm payrolls report has already led traders to lower their expectations for a Fed interest rate cut. The money market expects the Fed to cut interest rates by 45 basis points before the end of the year, suggesting that only one rate cut by the Fed this year is fully priced in, with an 80% probability of a second cut. The latest Reuters Fed survey showed that 59 out of 105 analysts believe the Fed will resume interest rate cuts next quarter, possibly in September, and 60% of analysts think the Fed will cut interest rates at least twice, but this is only a slim majority. In the absence of guidance from the Fed, analysts' expectations are also widely dispersed. Fed officials have generally urged a wait-and-see approach, avoiding providing any specific guidance on the path of interest rate cuts. San Francisco Fed President Daly has previously stated that two rate cuts this year still seem reasonable, while Bostic still expects only one rate cut. However, both have warned that this largely depends on how the economy develops. Market Reaction A few hours after the release of the CPI data, the US Treasury will hold two crucial Treasury auctions. It will sell $39 billion in 10-year Treasury notes in the early hours of Thursday and $22 billion in 30-year Treasury notes in the early hours of Friday. These results could have a significant impact on the direction of the economy, the Fed's response, and its interest rate policy stance. Coupled with the comprehensive tax and spending bill currently under consideration in Congress, volatility in the US Treasury market is set to intensify. This week's Treasury auction results will be closely watched, although economists and investors generally believe there will be no major surprises. Chip Hughey, head of fixed income at Truist Advisory Services, said, "If you look at the current yield levels relative to global peers, US Treasuries still offer a relatively attractive advantage... I expect demand to be quite strong, especially for the 10-year note auction." The US dollar index, which typically fluctuates with US Treasury yields, rebounded in the first half of May before pulling back to consolidate above the three-year low near the 98 mark. The counter-trend rebound has alleviated the oversold condition of the US dollar index's 14-day Relative Strength Index (RSI) , potentially laying the groundwork for the next round of declines, especially if inflation falls short of expectations. Technically speaking, the lows around 98 represent the most significant support level to watch , while the nearest clear overhead resistance comes from the downtrend line near 99.50 . Even if a hotter-than-expected inflation report triggers a rebound in the US dollar index, bears may look to sell into strength, joining the ongoing downtrend at more favorable prices. For gold, the current technical setup favors the bulls. If gold prices strengthen further and break through the immediate resistance level of $3,352-3,353 , it will reaffirm the bullish outlook and advance towards the intermediate resistance level of $3,377-3,378, thereby challenging the round-number resistance at $3,400. On the other hand, a pullback in gold below the $3,323-3,322 area may continue to attract some buyers and find decent support around $3,300 . If subsequent selling intensifies, gold prices may subsequently break below the $3,288-3,287 area, shifting market bias in favor of the bears and dragging prices down to the monthly swing low near $3,245, with this corrective decline potentially extending even further to near $3,200. In the current environment, tariff headlines and any potential trade agreements (especially between the US and China) may have a greater impact on the market than this month's inflation report , making it crucial to monitor developments in these areas as well.

The latest "C50 Direction Index" survey by Cailian Press shows that the market consensus forecast for new RMB loans in May stands at 600 billion yuan, down 35 billion yuan YoY from 95 billion yuan in the same period last year. The median forecast for new aggregate financing in May is 2.32 trillion yuan, up 26 billion yuan YoY. Market participants expect M2 growth may pick up in May amid improved liquidity and low base effects. On prices, the market anticipates CPI to remain relatively stable in May while PPI deflation may widen further. The median forecasts for CPI and PPI YoY growth rates are -0.2% and -3.3% respectively. The "C50 Direction Index Survey", initiated by Cailian Press and completed with participation from various research institutions, comprehensively reflects market expectations on macroeconomic trends, monetary policy sentiment and financial data. Nearly 20 institutions participated in this round. Market consensus forecasts median new RMB loans in May at 600 billion yuan In April, new RMB loans totaled 280 billion yuan, down approximately 450 billion yuan YoY. Household loans decreased by 521.6 billion yuan while corporate loans rose by 610 billion yuan, mainly driven by bill financing. For May, the median forecast for new RMB loans is 600 billion yuan, down 35 billion yuan YoY, with projections ranging from 430 billion to 1.25 trillion yuan. Market analysts attribute weak credit expansion in May primarily to constrained corporate loan demand, with future trends heavily dependent on fiscal policy intensity. Corporate loan growth YoY was mainly supported by increased bill financing, reflecting still weak effective loan demand and subdued financing appetite among real-economy enterprises. Data shows bill rates in May first declined then rebounded, maintaining April's sideways trend. Binbin Sun, chief economist at Caitong Securities, noted: "The phased implementation of comprehensive financial support policies announced by the PBOC on May 7, coupled with slightly rising bill rates in late May, both indicate weaker bank demand for bill-based credit expansion. Credit is expected to strengthen MoM but remain weaker YoY." Additionally, weak medium and long-term corporate loans in May were significantly affected by local government debt restructuring. Wenlang Zhang, chief macro analyst at CICC, stated: "New credit in May may remain relatively weak, with our forecast showing a YoY decline. An important factor remains potential reductions in credit stock due to government bond swaps." "Affected by local governments' efforts to resolve debt, some outstanding loans in the hidden debt of urban investment platforms have been replaced or repaid early. New loans are calculated as the difference between newly issued loans and loans repaid in the current period. Therefore, the scale of new loans in the month will be affected to a certain extent," said Liao Bo, the co-chief macro analyst at Zheshang Securities. In the first five months of this year, special refinancing bonds issued by various provinces for debt replacement totaled 160 million yuan, causing technical disruptions to credit. New aggregate financing in May may increase YoY, and the YoY growth rate of M2 may continue to rebound. In April, new aggregate financing reached 1.16 trillion yuan, with the YoY increase expanding to 1.2 trillion yuan, mainly driven by government bonds. According to this survey, the median forecast for the scale of new aggregate financing in May by market institutions is 2.32 trillion yuan, an increase of 260 billion yuan compared to 2.06 trillion yuan in the same period of 2024. The forecast range of participating institutions is from 2 trillion yuan to 2.74 trillion yuan. Overall, government bonds are expected to remain the main contributor to aggregate financing in May. High-frequency data shows that the net financing scale of government bonds in May was approximately 1.46 trillion yuan, still achieving a YoY increase of nearly 268.8 billion yuan compared to the high base in the same period last year. In addition, the industry expects that with the gradual allocation and use of fiscal funds, it may positively drive M1. Lu Zhengwei, the chief economist at Industrial Bank, said that under the influence of "deposit outflow" in May 2024, the growth rate of M1 significantly pulled back. Given the low base and the continuous advancement of debt resolution policies, the growth rate of M1 in May 2025 is expected to rise significantly. Regarding M2, on May 7, the People's Bank of China announced comprehensive RRR cuts and interest rate cuts. The RRR cuts are expected to supplement liquidity by around 1 trillion yuan, significantly easing the liquidity situation in May. The DR007 benchmark rate in May fell by 14 basis points compared to April. Lu Zhengwei expects that with the improvement in market liquidity and the impact of a low base, M2 in May may rise. In Liao Bo's view, the rebound in the growth rate of M2 in May is mainly related to the rectification of manual interest rate adjustments for deposits in April 2024, hence the impact of a low base. In addition, the shift of deposits to wealth management products may continue. In Q1 2025, the People's Bank of China promoted a moderate rebound in government bond yields through measures such as suspending government bond purchases and withdrawing liquidity, which led to a decline in the net value of some wealth management products. This resulted in some funds flowing back from wealth management products to deposit accounts, also supporting the rise in M2. The YoY growth rate of CPI in May is expected to remain under pressure, while the YoY decline of PPI may continue to widen. In April, CPI decreased by 0.1% YoY, with the growth rate remaining negative for three consecutive months. The core CPI, excluding food and energy prices, maintained a YoY growth rate of 0.5%. From a YoY perspective, market institutions forecast the median CPI in May to be -0.2%, with a forecast range of -0.4% to -0.1%. Notably, nearly 60% of market institutions expect the YoY growth rate of CPI in May to remain flat compared to the previous month. Industry insiders believe that due to abundant seasonal supply, food prices have declined mildly overall, keeping the YoY growth rate of CPI at a low level in May. Data shows that the Shouguang Vegetable Price Index in China fell by 16.3% YoY in May, further widening from the 14.2% YoY decline in April. "Regarding pork, from the supply side, the secondary fattening pigs that were replenished earlier are being marketed in succession, and the replenishment of secondary fattening pigs will continue on a rolling basis, keeping supply strong. Meanwhile, holiday demand is weaker than in previous years, driving the average pork price in 22 provinces down by 0.6% MoM in May. In other aspects, we expect non-food consumer goods driven by the trade-in policy to maintain a volume discount trend, while service prices may recover mildly," said Zhang Wenlang. Looking ahead, Sun Binbin expects vegetable prices to receive some short-term support due to continuous rainfall in many parts of south China, while pork prices are expected to remain in the doldrums due to the pressure from rising marketings. He projects YoY CPI to be -0.2% and -0.4% in June and July, respectively. In terms of PPI, the YoY decline in PPI widened by 0.2 percentage points to 2.7% in April. The median forecast for YoY PPI in May among participating institutions is -3.3%, with a forecast range of -3.5% to -3.0%. Regarding the potential further widening of the YoY decline in PPI in May, Wen Bin, chief economist at China Minsheng Bank, analyzed that from an international perspective, the positive developments in Sino-US negotiations have boosted risk appetite, leading to a slight rebound in commodity prices except for gold. However, commodity prices subsequently pulled back due to renewed tariff threats. Data shows that the monthly average of the CRB Index in May rose by 0.1% MoM, while the monthly average of metal prices fell by 1.6% MoM, the monthly average of industrial raw material prices rose by 0.1% MoM, and the monthly average of Brent crude oil prices fell by 3.7% MoM. Domestically, the monthly average of the Nanhua Industrial Products Index fell by 2.1% MoM in May, marking the third consecutive month of decline. Among them, the decline in domestically priced steel prices dragged down the metal index by 0.4% MoM; the decline in oil and coal prices drove down the energy and chemical index by 3.3% MoM; the monthly average of the Ministry of Commerce's weekly-published producer goods price index fell by 1.7% MoM, the largest MoM decline since September last year. In May, among the sub-indices of the manufacturing PMI, the index for the purchase prices of major raw materials fell by 0.1 percentage points to 46.9%, and the ex-factory price index fell by 0.1 percentage points to 44.7%. In Liao Bo's view, the changes in PPI are mainly influenced by the imported impact of the downward fluctuation in international crude oil prices on China, as well as the accelerated technological progress in some domestic industries and intense market competition pressure. "We believe that there is still uncertainty in the trend of international commodity prices. However, as domestic policies such as large-scale equipment upgrades and trade-in policies for consumer goods gradually take effect, they will provide some support for prices in certain industries. High-frequency data shows that it will be difficult for the MoM growth rate to return to the positive range," said Liao Bo.

Every year, among the global central banks' event calendars, the Jackson Hole Economic Symposium hosted by the US Fed and the Sintra Forum (ECB Forum on Central Banking) hosted by the European Central Bank (ECB) have consistently been the two most closely watched events. However, few may be aware that in Japan, a similar high-profile central banking event is now held annually... On Tuesday, the two-day annual central banking conference, hosted by the Bank of Japan (BOJ) and its affiliated think tank, commenced at the BOJ headquarters in Tokyo. Despite lacking hiking trails and scenic countryside views, this central banking event is still hailed by industry insiders as Japan's version of the "Jackson Hole Economic Symposium." Participants include renowned scholars from the US, Europe, and Asia, along with officials from the US Fed, ECB, Bank of Canada, and Reserve Bank of Australia, including the Fed's third-in-command, John C. Williams, President of the Federal Reserve Bank of New York. Industry insiders suggest that this year's global central banking symposium in Tokyo may focus on two troubling realities: sluggish economic growth and persistent inflation. Although most speeches are academic in nature and closed to the media, the theme of this year's conference is "New Challenges for Monetary Policy," and these "new challenges" are undoubtedly well-known to insiders: How should central banks respond to stubbornly high inflation, downside economic risks, market volatility, and US tariffs... These conflicting headwinds are largely caused by the policies of US President Donald Trump, and the uncertainty of the outlook is putting many central banks in a difficult position, regardless of whether they are planning to raise or cut interest rates. For example, the BOJ, as the "host," is still insisting on continuing to raise interest rates and steadily scaling back its bond-buying program, which stands in stark contrast to other peers globally that are cutting interest rates. However, recent global developments have raised questions about such tightening measures. What will be discussed at this year's conference? At last year's conference, participants summarized the gains and losses of responding to economic recessions by discussing lessons learned from using various unconventional monetary easing tools. The conference also explored whether Japan—the "outlier" that maintained ultra-low interest rates while other major central banks aggressively raised rates—could emerge from decades of deflation and low inflation with the help of nascent and sustained wage growth. This year, although central bankers' concerns may primarily focus on tariff-induced economic recessions, the conference's agenda indicates that policymakers remain highly sensitive to the risk of falling into a prolonged period of excessively high inflation. According to the meeting agenda seen by industry insiders, one of the parallel sessions will focus on "reserve requirements, interest rate control, and quantitative tightening." Another session will discuss a paper published by the International Monetary Fund (IMF) in December last year titled "Monetary Policy and Inflation Scare." The paper explains how significant supply shocks, such as those caused by the COVID-19 pandemic, can lead to persistent inflation and warns that central banks may face risks if they believe cost-push price pressures can be ignored. "Better to be 'slow' than to 'make a mistake.'" This warning holds implications for major central banks currently facing similar dilemmas—a situation exacerbated by global trade wars and Trump's erratic trade policies. The US Fed was initially expected to implement multiple interest rate cuts this year, but as the risk of inflation rising due to Trump's tariffs intensifies, the Fed has been forced into a wait-and-see mode. Meanwhile, according to industry insiders' interactions with European Central Bank (ECB) policymakers, although the ECB is expected to cut interest rates again in June, the rationale for pausing action is strengthening as inflation challenges emerge. "Tariffs may curb inflation in the short term but pose upside risks in the medium term," Isabel Schnabel, an ECB Executive Board member and a prominent hawk, explicitly called for a pause in interest rate cuts at a conference at Stanford University on May 9. Meanwhile, Japan, currently in a tightening cycle, is also facing the challenge of balancing domestic inflationary pressures with the downside risks to economic growth posed by US tariffs. Trump's tariffs have forced the Bank of Japan (BOJ) to sharply lower its economic growth forecast on May 1 and hint at a pause in its interest rate hiking cycle—currently, the short-term interest rate remains at a low of 0.5%. Despite this, BOJ Governor Kazuo Ueda has signaled readiness to resume interest rate hikes if underlying inflation continues to stabilize toward the 2% target. Japan's core consumer inflation rate hit a two-year high of 3.5% in April, with food prices surging 7%, indicating the pressure rising living costs are placing on Japanese households. Nobuyasu Atago, a former BOJ official and now chief economist at Rakuten Securities Economic Research Institute, stated that it is evident that the BOJ has failed to fulfill its mission of price stability. Inflation will remain one of the BOJ's concerns, and the BOJ may already be lagging in addressing domestic price pressures. As of press time, Kazuo Ueda, Governor of the Bank of Japan, had delivered a keynote speech at the opening event of the annual meeting, stating that the degree of monetary easing would be adjusted as needed. The US dollar fell sharply against the Japanese yen by over 30 pips in the short term. Subsequently, Agustin Carstens, General Manager of the Bank for International Settlements, was also scheduled to deliver a speech, which investors should continue to monitor.

According to a survey of economists and analysts, as inflation is expected to fall below the European Central Bank's (ECB) 2% target in early 2026, the ECB is set to cut interest rates more than previously anticipated this year, with the deposit rate expected to drop below 2%. Since June last year, the ECB has cut interest rates seven consecutive times, reducing the deposit rate from 4% to the current 2.25%. The latest survey indicates that respondents generally expect the ECB to continue cutting interest rates in June and September, further lowering the deposit rate to 1.75%. However, analysts predict that the ECB will raise interest rates back to 2% by the first quarter of 2027. Additionally, analysts have revised down their inflation expectations, believing that the average inflation rate in the first two quarters of 2026 will be 1.7% and 1.8%, respectively, lower than the 1.9% projected in the previous survey. ECB officials have recently expressed optimism about inflation and are preparing for further interest rate cuts, possibly as early as June. Gediminas Simkus, President of the Bank of Lithuania, stated last Friday that "another interest rate cut is needed in June" due to "clear deflationary forces" such as the eurozone not yet fully feeling the impact of US tariffs, coupled with falling energy prices and a stronger euro. Simkus also noted that "there is a possibility of another interest rate cut after June," although the timing remains uncertain. He suggested that this move could occur in July, September, or even December. Olli Rehn, Governor of the Bank of Finland, also stated last Friday that he would support an interest rate cut next month if the ECB's new economic forecasts confirm the prospects of deflation and sluggish economic growth. However, Isabel Schnabel, a member of the ECB's Executive Board, expressed caution, advocating for a "prudent response" strategy, arguing that it is more appropriate to maintain interest rates at current levels in a highly uncertain environment. Greg Fuzesi, an economist at JPMorgan Chase, said on Monday, "For the ECB to continue cutting interest rates after June, it still needs data to show downside risks to support this decision. We still believe this will happen, even if Schnabel requires significant convincing to support an interest rate cut in June."

On April 16, at the AICE 2025 SMM (20th) Aluminum Industry Conference and Aluminum Industry Expo—Alumina and Aluminum Raw Material Forum , hosted by SMM Information & Technology Co., Ltd. (SMM), SMM Metal Trading Center, and Shandong Aisi Information Technology Co., Ltd., and co-organized by Zhongyifeng Jinyi (Suzhou) Technology Co., Ltd. and Lezhi County Qianrun Investment Promotion Service Co., Ltd., Lin Jinyu, a researcher at SPIC Aluminum International Trading Co., Ltd., shared a study on "Research on Aluminum Price Changes in 2025 Under Green Transition." Does Supply and Demand Really Determine Prices? The End of the Last Cycle Is the Beginning of the Next For producers, inflation is both an opportunity and a challenge. Rising commodity prices allow producers to gain more profit, but if raw materials cannot be secured, it may lead to production halts. Therefore, it is necessary to ensure raw material reserves and hedging. For processing enterprises, there is no need to overly focus on price differences over 3-5 days or even about a month. Instead, they should aim to lock in the "quantity" and "price" of raw materials in the broader trend, as tomorrow's orders will always be more profitable than today's. For traders, it is crucial to seize structural market opportunities. Supply vs. Price Perspective 1. What Determines the Change in Commodity Prices? In past studies, we always believed that reduced supply leads to price increases, increased demand leads to price increases, and declining inventory leads to price increases, among others. 2. A Real Case of Aluminum However, from the operational mechanism of aluminum prices from 2012 to 2024, the above conclusions are not accurate. Only during certain periods in 2012-2013 and 2020-2021 did rising supply lead to falling aluminum prices. 3. Actual Patterns More often, rising supply is accompanied by rising prices, while declining supply is often accompanied by falling prices. Over the past decade, this has been a more probable event behind the operation of aluminum prices. 4. Why Is This the Case? Because high aluminum prices always stimulate producers to increase production, while low aluminum prices often force high-cost capacity to exit the market due to unprofitability. This indirectly proves the scientific logic behind price increases leading to production growth and price decreases leading to production cuts. The conclusion that increased supply will lead to price declines is at least not rigorous. Demand vs. Price Perspective 1. What Determines the Change in Commodity Prices? From the demand perspective, declining inventory indicates increased apparent demand, which should also be accompanied by rising prices. 2. A Real Case of Aluminum However, from the operational mechanism of aluminum prices from 2012 to 2024, the above conclusions are also not precise. From 2016 to 2024, there were multiple cases of rising inventory with rising prices and declining inventory with falling prices. 3. Actual Patterns This indicates that supply and demand fundamentals based on quantity (inventory) cannot precisely predict the operation of aluminum prices. Balance vs. Price Perspective 1. What Determines the Change in Commodity Prices? From the balance perspective, shortages of commodities mean rising prices, while surpluses mean falling prices. 2. A Real Case of Aluminum However, from cases since 2018, the green box areas reflect the above patterns, while the red circle areas show the opposite. 3. Actual Patterns More often, surpluses do not drive prices down but instead drive prices up or cause fluctuations. Similarly, shortages do not necessarily lead to price increases, and significant shortages are often accompanied by price declines or fluctuations. 4. Why Is This the Case? Therefore, the conclusion that shortages or surpluses based solely on quantity will lead to price increases or decreases is at least not rigorous. Supply and Demand Do Not Fully Determine Prices Historical data tells us that reduced supply does not necessarily mean price increases, and increased supply does not necessarily mean price increases. Historical data tells us that increased demand (declining inventory) does not necessarily mean price increases, and decreased demand (rising inventory) does not necessarily mean price increases. Historical data also tells us that shortages do not necessarily drive prices up, and surpluses do not necessarily drive prices down. What Determines Supply? The Development History of China's Aluminum Industry It elaborated on the development history of the aluminum industry based on aluminum production. Four Stages of China's Aluminum Development • 1980-1997: Initial Stage Domestic: External sanctions were lifted, and large-scale loans introduced advanced Western industries. Overseas: The Latin American economic crisis led to industrial outflows, which Asia, including China, benefited from. • 1997-2007: Development Stage Domestic: To address domestic economic bottlenecks and the Asian financial crisis, investments were driven by government bonds. Overseas: China's accession to the WTO attracted significant foreign investment. • 2007-2015: Takeoff Stage Domestic: The 4 trillion yuan government bond investment to address the subprime crisis led to excess funds flowing into real estate, boosting aluminum demand. Overseas: QE1, QE2, QE3 injected $4 trillion, with over 60% flowing into commodity markets. • 2016-2025: Restriction Stage Domestic: A ceiling was set to protect enterprises and prevent disorderly expansion. Overseas: The pandemic, $10 trillion from the US and India, and similar measures from the UK, EU, and Japan entered the commodity market, with aluminum prices peaking and profits nearing 7,000 yuan/mt. Summary of Development History Capital Circulation Drives Supply From the four cycles of aluminum development, none were without the driving force of capital circulation. Since 2015, China has effectively refused to use resources, the environment, and labor as costs to export deflation to currency-producing countries. However, US dollar hegemony remained unshakable at the time. The real game began with the 2015 exchange rate reform. The imported inflation in 2020 was already the swan song of US dollar hegemony. What Determines Demand? It elaborated on the decisive role of US dollar tides on commodity prices over the past 50 years, the events triggered by each wave of US dollar tides, and the commodity price fluctuations caused by these tides. Three Capital Flows Determine Commodity Prices Capital Flow Volume: The most critical factor determining prices is the total volume of circulating capital. Both Friedman and Keynes stated that inflation is a monetary phenomenon. Irving Fisher: MV=PQ Capital Flow Direction: The direction of capital flow between regions also has a decisive impact on prices. Large-scale inflows into the securities market drive stock prices up, while large-scale inflows into the commodity market drive commodity prices up. Capital Flow Speed: Flow speed refers to the interest rates of various currencies. Interest rates are the time cost of prices. When interest rates are low, the speed of currency circulation accelerates, leading to faster asset price increases. Future Projections for Aluminum Supply and Demand It analyzed monetary flow volume, monetary flow speed (US fiscal revenue and expenditure), China's monetary flow speed (RRR cuts and interest rate cuts indicate faster currency circulation in China), and EU and Japan's flow volume and speed (increased flow volume and faster speed in Europe; stable flow volume and slower speed in Europe). Analysis of Monetary Flow Direction Spatial Flow Direction: Monetary flow direction is divided into spatial flow and inter-product flow. Spatial flow refers to the flow within countries. For example, the recent sharp decline in the US dollar index indicates capital outflows from the US, leading to simultaneous declines in US exchange rates, stocks, bonds, and commodity markets. Inter-Regional Flow: The Secret of Capital Circulation It also summarized and analyzed the secrets of trade wars, the different spheres of influence between China and the US, whether currency depreciation equals increased exports, whether tariff wars equal decreased exports, and extreme measures focusing on Russia-Ukraine and the Middle East. Analysis Results • Additions: Mostly Concentrated in Indonesia In 2025, overseas aluminum production is expected to increase by 1.1 million mt, with 750,000 mt concentrated in Indonesia, accounting for 67%. In the long term, of the 8.2 million mt capacity, 4.5 million mt will be commissioned in Indonesia, accounting for 55%. • Limitations: Indonesia's Geopolitical Landscape and Culture Limit Aluminum Efficiency Indonesia, composed of over 17,000 islands, inherently faces challenges in industrial development due to transportation and other factors. Central Asia, the Middle East, and North Africa have excellent resource endowments, rapid logistics, and prime geographical locations. However, conflicts have hindered industrialization. Significant growth in global aluminum supply and scale will only be achieved when these regions meet the conditions of "harmony among people." It also analyzed the trends of M, V, and Q. Conclusion Price Forecast In the short term, market concerns persist. Whether demand will increase due to tariff reductions requires market validation. In the long term, based on analysis results, M and V increase while Q remains stable. P is bound to rise. There is strong confidence in the medium and long-term trends of aluminum prices. Click to view the AICE 2025 SMM (20th) Aluminum Industry Conference and Aluminum Industry Expo Special Report