Take copper as an example:

As a bulk industrial raw material, copper is endowed with dual attributes by the market - its own commodity attributes and derived financial attributes.

The former reflects the effect of changes in supply and demand in the copper market itself on price trends, while the latter mainly reflects the market behavior of using financial leverage for speculation.

Under normal circumstances, copper futures reflect its commodity attributes, but in a specific historical period and a certain stage of copper price operation, the financial attributes of copper futures may play an important or even leading role.

At the end of the current bull market cycle, the copper market mainly interprets its financial attributes.

While we are watching changes in the fundamentals of supply and demand in the copper market, we should also pay close attention to the evolution of its financial attributes, which may be helpful in grasping the trend transformation of copper prices.

From a broad perspective, the financial attributes of copper are reflected at three different levels:

First, as a financing tool.

Copper has good natural properties and value-preserving functions, and has always been favored as the first choice for warehouse receipt transactions and inventory financing (Financial Deal).

Many banks or investment banks are directly or indirectly involved in warehouse receipt transactions and conduct financing operations through large traders with a spot background.

This financial attribute in the traditional sense actually functions as a risk management tool and investment medium.

Second, as a speculative tool.

Copper futures is one of the most mature commodity futures trading varieties and forms an integral part of the entire financial market, thereby attracting a large amount of investment funds to intervene and using financial leverage for speculation. This in itself reflects its "pan-financial Properties" characteristics, spot copper is nothing more than a symbol of speculation.

The protagonists of speculation are none other than investment funds, including a large number of CTA funds based on technical charts and other transactions, and macro investment funds that trend based on changes in the fundamentals of supply and demand in the copper market. .

According to relevant information provided by foreign countries, the investment scale of CTAs funds in metals has reached about 10% of its total assets, accounting for more than 35% of the total LME holdings, and accounting for 28% of the total trading volume. -31%, while investment in the copper market reaches about 24% of base metals; macro investment funds in the copper market pay more attention to the commodity attributes of copper futures or the cyclical changes in supply and demand fundamentals, and generally adopt medium- and long-term trend investment methods.

Third, as an asset class.

As an important natural resource and industrial raw material, copper, together with other commodities such as crude oil and gold, is valued by more and more large investment institutions, and some even regard it as the same as stocks and bonds. The "hard assets" corresponding to "paper assets" have become an independent asset class on par with financial assets, thus becoming their important investment targets or investment substitutes.

Copper and other commodities are called "asset classes" and have three functions. One is directly used as a financial tool for investment profit; the other is used as a hedging tool to hedge against the depreciation of the US dollar; the third is used as a countermeasure against the depreciation of the US dollar. A hedge against inflation.

As an asset class, it is the most concentrated expression of the financial attributes of copper. In fact, it can also be defined as a narrow financial attribute, which is also the focus of this article.

Elevating commodities to the level of a mainstream asset class shows a surge in funds’ interest in commodity investments.

These funds are mainly large investment funds such as retirement funds, mutual funds and some hedge funds, and have poured into the commodity futures market mainly in the form of index funds (Index Funds).

According to information provided by the investment bank Goldman Sachs, the number of funds tracking the commodity index was about 15 billion US dollars in mid-2003, but it had risen to 40 billion US dollars by the end of 2004.

The renewed large-scale intervention of investment funds pushed the CRB index to continue to surge by about 15% in just over a month from February to March this year, and hit a record high in more than 20 years; NYMEX crude oil futures The market's total position size and fund net long positions both set new historical records in early April this year; the total COMEX copper position also hit a historical record of more than 132,000 lots.

Index funds use a basket of commodities as investment objects, and carry out weight matching according to different commodities, and basically conduct overall operations in the same direction, without paying much attention to the fundamentals of each commodity itself.

Even in the soybean and other agricultural products markets that have entered a bear market since last year, index funds also stepped in to buy in February this year, driving prices to rise rapidly.

It is said that of the US$1 trillion (trillion) monthly trading volume of global commodity futures trading, institutional investors such as funds have contributed US$40 billion.

What are the factors that stimulate investment funds to have strong interest in investing in commodity markets? The main reasons are as follows:

1. Mainly attracted by the high return on investment in the commodity market in recent years.

For a long time, a large amount of international hot money has gathered in financial markets such as the stock market and bond market. However, in recent years, the trend of the capital market has been uncertain. The performance of the stock market has been mediocre, and there have been problems in the bond market and other asset markets. Return on investment is low.

In order to pursue higher investment returns and diversify investment portfolios to diversify investment risks, a large number of funds have withdrawn from the traditional financial and derivatives markets, and some have switched to the hot commodity market.

Although the Goldman Sachs Commodity Index has fallen more than 12% from its peak in October 2004, the index still rose 25% last year.

By comparison, the S&P 500 rose only about 10% last year.

According to Goldman Sachs estimates, annual investment returns on the Goldman Sachs Commodity Index have averaged 12% since 1970, while annual investment returns on major stock and bond indexes have averaged between 8.5% and 11% during the same period. between.

2. The commodity market is facing a global shortage of energy and bulk raw materials, and China’s hunger for basic raw materials and natural resources has intensified the tightness of the global commodity market.

Against the background of global economic expansion, commodity futures are in a cyclical bull market, providing a historic opportunity for funds to fully intervene in the commodity market and do long positions.

3. The continued depreciation of the US dollar against a basket of currencies has greatly reduced the attractiveness of US dollar assets.

In order to hedge the risks faced by holding U.S. dollar assets, investment funds short the U.S. dollar and absorb commodity futures as hedging tools.

4. As inflation gradually rises, buying goods to preserve value has become an effective means to combat inflation.

As major economies such as the United States have implemented overly loose monetary policies for a long time, driven by the continuous surge in international crude oil prices and sharp rises in raw material prices, the market is increasingly worried about rising inflation.

In fact, there are deep-seated reasons for the rediscovery of commodity value and rising prices.

In the late 1990s, the so-called "virtual economy" represented by the Internet economy experienced a stage of irrational prosperity, causing the global real economy to be left out and commodity prices to be distorted or severely underestimated. , many commodities once fell below the cost of production.

At the same time, it has also led to a serious shrinkage in investment in many basic resource fields, including copper, crude oil, etc., and long-term underinvestment will inevitably lead to today's supply and demand imbalance.

The manager of a hedge fund believes that after 20 years of low-level investment, commodities provide huge speculative opportunities, and the initial return on investment is estimated to be 45%.

With the bursting of the virtual economic bubble, the real economy will naturally turn around, and the return of commodity value will inevitably occur in a drastic way of overcorrecting.

Human economic life continues to follow the cycle of prosperity and decline, repeated over and over again.

In the same way, the enthusiasm of speculative capital for commodities will and cannot continue to burn! First of all, the objective laws of the macroeconomic cycle and the bull-bear alternation of commodities such as copper are difficult to change.

The structural changes brought about by the Internet economy have not changed the economic boom cycle, but have only prolonged the prosperity cycle of a few countries such as the United States.

Under the premise that the current global economic structure and the balance of supply and demand structure in the copper market cannot be fundamentally broken, it is unreasonable to talk about the emergence of a so-called new "super cycle" or the emergence of a so-called "super cycle" in commodity markets including copper. The "super bull market cycle" seems a bit fanciful.

After all, the supply and demand relationship in the copper market is the basis for determining its financial attributes.

Secondly, there is already a lot of controversy in the market as to whether commodities will become a mainstream asset class. Many people doubt whether the current commodity craze can transform commodities into a fully mature asset class. Because of this The argument is reminiscent of the early days of Internet stocks, when they soared unreasonably.

Even so, the large-scale participation of investment funds such as index funds in commodity market transactions may be just a historical long-term phenomenon, which can also be reversed to short-term, thereby increasing the number of commodity futures such as copper. The market only has the capacity for long-term speculative funds.

No matter what kind of investment fund intervenes in the commodity market, it is impossible to break away from the macroeconomic background at that time, nor can it break away from the transformation of commodity supply and demand balance brought about by the macroeconomic cycle.

Finally, there are also variables that attract funds to intervene heavily in the commodity market.

It is still unknown whether the depreciation of the US dollar can continue, and whether the hedging mechanism of shorting the US dollar and buying commodities can be maintained; whether the high price of crude oil will plunge the world's major economies into a quagmire of stagflation , remains to be seen.

In fact, the fund’s serious net long position in the crude oil market has been adjusted to a neutral state, and the outlook for oil prices has tended to be chaotic; the continuous increase in interest rates will increase the capital cost of holding commodities and their derivatives. , and at the same time, it will gradually have a substantial inhibitory effect on economic growth.

Therefore, at this stage, we should pay attention to the trends of funds in the entire commodity market, especially the changes in the position structure of funds in commodity markets such as copper futures and crude oil, which are the leaders.

Investment demand can affect the operation of copper prices, and speculation is more likely to cause copper prices to seriously deviate from its value in stages. However, it is still the supply and demand relationship that ultimately determines the trend cycle of copper prices; the financial attribute itself is bidirectional and can A sharp rise in copper prices can also cause a sharp fall in copper prices; the phased characteristics of financial attributes determine that it is impossible to replace the commodity attributes of copper and dominate it for a long time.