[Weekend Money] In the Second Half, Industrial Metals Are More Promising for Raw Material Investment Than Gold or Oil

In the second half of this year, investment in raw materials is expected to be promising, particularly for industrial metals such as copper. This positive outlook is due to anticipated strong demand driven by artificial intelligence (AI) and electric vehicles following the war.

According to Hana Securities, the preference for raw materials in the second half of the year is projected to be highest for industrial metals, followed by precious metals, and then crude oil.

Jeon Gyuyoun, a researcher at Hana Securities, explained, "Typically, when geopolitical risks cause disruptions in oil supply and oil prices rise, the prices of various raw materials—such as natural gas, fertilizers, and metals—tend to rise together. This is because energy is a key input for the production and transportation of major raw materials. During the war, prices surged primarily for energy products where supply shortages were visible, but after the war, the raw materials market will begin to focus on ripple effects that had not been previously considered."

The Strait of Hormuz serves as a major passage for various raw material trades, not just oil and natural gas. For global seaborne trade, aside from energy, significant proportions of raw materials passing through the Strait of Hormuz include sulfur (50%), chemicals and fertilizers (13%), and aluminum (7%). Jeon noted, "While industrial metals did not see significant price changes during the war, it is highly likely that supply has tightened due to damage to production facilities, while demand remains solid."

Despite the downward pressure on the global economy caused by the war, if the G2 economies (the United States and China) continue to perform well, demand for industrial metals such as copper is expected to remain robust. In particular, AI and electric vehicles are anticipated to drive demand for industrial metals. Jeon analyzed, "China accounts for about 57% of global refined copper consumption, making it a dominant source of demand for industrial metals. Following construction and power grids, demand for electric vehicles is rapidly increasing." In the United States, demand for copper in data centers is expected to be strong. Jeon further stated, "Especially as the power requirements for AI servers increase, demand for copper-intensive equipment is likely to expand. The rising importance of metals as security assets, such as through the U.S. 'Project Volt,' will also serve as a medium- to long-term growth driver."

The point at which international oil prices stabilize is expected to be in the fourth quarter. Jeon commented, "Taking into account continued oil supply disruptions and declining inventories for the time being, we project that the West Texas Intermediate (WTI) oil price band for the second half of the year will be between USD 70 and 95 per barrel. While the easing of risk premiums after the war will gradually lead to lower oil prices, it will take time for oil supplies to normalize, and global oil inventories are likely to decrease until the third quarter." Jeon added, "We expect international oil prices to stabilize close to pre-war levels around the fourth quarter of this year."

The price of gold in the second half will likely be influenced by interest rates and movements in the U.S. dollar. Jeon predicted, "In the first half of this year, gold prices experienced extreme volatility. Notably, the heightened uncertainty in financial markets due to the war did not lead to a rise in gold prices; instead, gold prices moved in line with shifts in interest rates and the dollar, which were affected by rising oil prices. If expectations for a Federal Reserve rate cut lead to lower interest rates and a weaker U.S. dollar, the environment should become favorable for gold prices." However, Jeon also forecasted that volatility would be unavoidable as speculative demand flows out of the market. Hana Securities has set the gold price band for the second half of the year at USD 4,100 to 5,300 per ounce.

This content was produced with the assistance of AI translation services.