This week witnessed a significant inverse correlation between the prices of gold and crude oil, with oil posting substantial gains while precious metals experienced a notable drop. Typically, rising oil prices benefit gold through two channels: first, by increasing safe-haven demand due to escalating geopolitical conflicts; second, by boosting inflation expectations through higher energy costs, thereby enhancing gold's appeal as an inflation hedge. Consequently, oil and gold prices often move in tandem, especially when inflation expectations rise, which should increase demand for gold allocations.
However, recent market behavior indicates a shift in gold's pricing dynamics. After a year of sustained price increases, gold's asset characteristics have evolved from a "safe-haven asset" to a "tradable risk asset." On one hand, expectations of global liquidity easing, central bank gold purchases, and geopolitical risks have collectively driven significant price appreciation. On the other hand, continuous capital inflows have led to crowded trading positions, making prices more sensitive to marginal liquidity changes. In this context, gold is no longer solely driven by fundamentals but is increasingly influenced by capital flows and trading structures.
Concerns over prolonged conflicts have risen, reducing the risk-reward attractiveness of oil-related bets. This week, energy prices, particularly crude oil futures, showed notable increases, reflecting growing market consensus about protracted conflicts. In short-term trading, capital has rapidly concentrated in oil-sensitive assets, leading to overcrowded positions and diminished risk-reward appeal. The primary market disturbance stemmed from the escalating U.S.-Iran conflict, which triggered a repricing of geopolitical risks. Since the conflict intensified, sectors such as oil shipping, ports, and coal chemicals have experienced rapid but volatile gains, closely tracking oil price fluctuations and geopolitical developments. These trends primarily reflect short-term event-driven speculation, characterized by high volatility. Currently, market expectations of prolonged conflict are largely priced in, reducing the marginal benefits of betting on further escalation. Any signs of geopolitical de-escalation or declining trading enthusiasm could lead to rapid profit-taking, compounded by crowded positions in certain sectors amplifying volatility.
Which A-share sectors may benefit persistently from prolonged geopolitical conflicts? The medium-to-long-term structural shifts driven by higher oil price baselines remain underappreciated by the market. First, the external demand logic for the new energy industry chain could strengthen. Following the Russia-Ukraine war, the European Commission proposed the REPowerEU plan to accelerate new energy adoption. If the U.S.-Iran conflict persists, global efforts to reduce fossil fuel dependency may intensify, prompting countries to rebalance energy security and transition priorities. New energy investments are likely to emerge as a key medium-to-long-term theme. Marginally, the energy storage sector showed notable activity this Friday, indicating early capital positioning based on this logic. Additionally, electricity supply may become a bottleneck for AI development, opening new demand avenues for the new energy chain. To address power shortages driven by emerging industries like AI, new energy solutions are virtually the only viable option. Demand for sectors such as photovoltaics, energy storage, power electronics, and third-generation semiconductors in the AI era could far exceed expectations.
From a longer-term perspective, geopolitical instability may have transitioned from temporary shocks to a structural trend. In recent years, major global economies have steadily increased military spending as a percentage of GDP, with Europe, Japan, and the U.S. significantly raising defense budgets. This trend supports elevated demand for upstream resources like non-ferrous metals, bolstered by military, energy, and manufacturing expansion. Meanwhile, midstream equipment manufacturing sectors such as engineering machinery and power equipment may benefit from global infrastructure and manufacturing reconfiguration. For China, its comprehensive industrial system and cost advantages position it strongly in the global manufacturing reshuffling, potentially lifting external demand baselines for related industries.
Investment recommendations: In the short term, reduce exposure to conflict-driven sectors like oil shipping, ports, and coal chemicals. For medium-to-long-term horizons, focus on two key themes: new energy and global manufacturing restructuring. First, against the backdrop of energy security and expanding power demand (driven by AI computing), external demand for new energy chains—including photovoltaics, energy storage, and power equipment—is poised to rise. Second, geopolitical turmoil is accelerating a "safety-first" reorganization of global manufacturing, potentially systemically elevating demand for non-ferrous metals, engineering machinery, and high-end equipment, offering compelling medium-to-long-term allocation value.
Risks include tighter-than-expected global liquidity, heightened complexity in market speculation, and unforeseen policy shifts.
Comments