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Dialogue with Pei Fengke Chen Dapeng Part 1 | Clearing the Fog of Commodities to Understand the Most Authentic Market
Click to register for this master class &#34;Understanding Gold, Silver, and Copper: A New Paradigm for Global Metal Pricing&#34;
<h2>Ten Years Ago: Was Gold Considered &#34;Expensive&#34; Even with a $50 Annual Increase?</h2>
I first got involved in the commodity industry around 2015-2016, initially participating in some mining merger and acquisition projects, at what could be described as the lowest point of the industry.
I have previously mentioned in my public account: my first task was to try to convince a leader of a state-owned enterprise that the price of gold could rise by $50 in the coming year. At that time, gold was around $1050 or $1100, and everyone thought that gold prices wouldn't even rise by 5% in a year. At that time, it might have been hard for anyone to believe, as the all-in sustaining cost (AISC) of gold production was about $700 to $800. Many people would say: If the production cost is only $700 or $800, how can the gold price rise to $1100 or even $1200 ? These statements seem very absurd today, but at the beginning of my career, almost no one in the industry was paying attention.
If you look back, you will find that after Zijin Mining acquired the Kamoa copper mine, there was a full four to five years during which the market had no reaction to this copper mine. People thought, you spent $400 million to buy a mine, so what? They didn't see it as a great opportunity.
Later, I was fortunate to join Zijin Mining, engaging in macro research and strategy research, including some commodity investments and hedging advice. I can say that in the field of commodities, I have experienced everything from initial mergers and acquisitions, investment research, to later viewing investments from two different perspectives: hedging and proprietary trading. So, although my 10 or 11 years of experience may not be particularly rich compared to many seasoned investors, I have been fortunate to participate in different institutions and processes, allowing me to view the trading structure of the same commodity from different perspectives.
<h2>The Truth of Market Consensus: There Is No Single Trading Logic</h2>
My biggest realization is that every participant in this market is here to make money, but because everyone's endowments and starting points are different, the thoughts and methods for making money are completely different. Therefore, it is difficult to unilaterally understand the thinking of the opposing side.
We often hear the phrase that people are trying to understand &#34;what logic the copper market is trading on.&#34; But in my view, this so-called &#34;unified logic&#34; actually does not exist. We have rarely seen a period where all participants in the market are trading the same thing.
Basically, everyone is doing their own thing based on their understanding of the market, the indicators they observe, and the attributes of their respective enterprises. At any given moment, there are many different voices in the market
If there is one major takeaway, I believe it is to communicate as much as possible with different participants to gain everyone's perspective on the same market. On this basis, we can then see if there are any specific conclusions that may ultimately be drawn.
<h2>Industry experience has helped me a lot, but it also made me view the market 180 degrees in the wrong direction</h2>
When it comes to mistakes and experiences, I have many personal insights. In October 2022, I went to New York, and at that time, Los Angeles and New York were still brightly lit, but due to the poor performance of the US stock market, everyone's mood was very low. The most popular saying in the market at that time was &#34;Federal Reserve hikes into recession.&#34;
When formulating the 2023 gold outlook, I was inevitably influenced by this narrative. I thought that since rapid interest rate hikes would lead to a recession in the US, gold would be a good asset; at the same time, I had overly high expectations for China's recovery after reopening, predicting a scenario of &#34;China's recovery + US recession&#34; in 2023. In hindsight, this judgment was completely wrong.
My mistake at that time was overly relying on traditional economic cycle logic (such as recession, recovery, or stagflation), while ignoring more fundamental structural driving factors: In the US, after emerging from the pandemic, the country still maintained an unexpectedly high fiscal deficit. In China, the real estate sector remained in a structural quagmire, which is not a simple cyclical fluctuation but a structural drag.
In this era, if you abandon attention to structural driving factors and only focus on historical patterns of economic cycles, you are likely to make completely wrong judgments about the market.
Although my macro judgment for 2023 was completely wrong, luck was on my side. In the first half of the year, due to the depreciation of the yuan, gold performed well; in the second half, the outbreak of the SVB (Silicon Valley Bank) crisis changed interest rate expectations, and gold prices improved accordingly. However, we must recognize that luck does not equate to logical correctness. If we fail to distinguish between structural and cyclical issues, we can easily fall into a situation where we lose sight of both sides in commodity trading.
Looking back at the first half of 2022, I thought the Federal Reserve's interest rate hikes might not reach 5.25%, while the mainstream view at the time believed that reaching 2.25% would be the limit. By 2023, when SVB collapsed and the number of major investment banks shrank from nine to eight, the atmosphere reminded people of the 2008 financial crisis, but the market's final performance was surprising.
A recent example is the fourth quarter of 2025. At that time, the volatility of Shanghai silver reached 40%, which, based on historical experience, is usually a temporary high point. However, I overlooked the fact that the increase in silver positions and holdings far exceeded expectations. Positions and trading volume are often leading indicators of volatility; when leading indicators break expectations, volatility will also exceed expectations. Ultimately, silver prices rose another 100% from that position.
This once again confirms my point: Historical experience can sometimes be wealth, and sometimes it can become a huge burden. Whether it is wealth or a shackle depends on whether you can accurately extract those structural driving factors that can change paradigms from the complex cyclical patterns
**
<h2>The Truth About Short Squeezes in Gold, Silver, and Copper: It's Not That Mysterious, It's Just &#34;More Money Than Goods&#34;</h2>
First, I want to clarify that due to our professional background, I am not the best candidate to answer the question of &#34;short squeezes,&#34; and in some areas, we might even be the worst candidates.
Why do I say this? Because anyone who wants to initiate a short squeeze will definitely avoid the views of producers. I still remember when copper prices were rising, my leader asked me if I could find out what everyone thought about short squeezes. I replied at the time: Asking is definitely not a problem, it's my duty; but I must give you a warning first, anyone who wants to do a short squeeze will not provide the most honest views to producers—like us, who are trying to hedge in the market.
But I can provide a basic explanation. In the commodity market, to put it simply: there is always more money than goods.
In this world, no matter how you put it, for many varieties, &#34;money is more than goods.&#34; Although I can't say it's 100%, there are indeed very few varieties where &#34;goods are more than money.&#34; When there is more money than goods, if someone can concentrate funds, or establish a large long position driven by sudden events, it will force the shorts to deliver. If the shorts cannot procure enough physical goods, it will lead to a sharp rise in prices in the short term.
Theoretically, after a short-term price increase, the supply of goods should increase, but if combined with some sudden events, or limited by the delivery mechanisms of exchanges, leading to an inability to increase supply, the price will form a &#34;positive feedback&#34; rising mechanism. The end of such situations often involves everyone sitting down to have a good discussion and resolving the matter properly.
So, if I were to explain what a short squeeze is in four words, it would be &#34;more money than goods.&#34;
I candidly say that I do not recommend investors make studying short squeezes a regular strategy. I do not deny that on familiar varieties, this can indeed be a very good money-making opportunity, but it remains a high-volatility area, accompanied by many regulatory policies, with numerous factors to consider.
In this masterclass sharing, we will discuss the situations we observed during the copper price increase in 2024, along with case discussions on previous short squeeze events in non-ferrous varieties. We can see that by 2024, traders in the copper market have become somewhat more mature.
Although I believe many similar events will still occur in the future, I will not encourage everyone to treat this as a regular strategy. It can indeed be a way to make money if you encounter it, see it, and understand it well; but for various reasons, we do not encourage broader investors to participate in such high-volatility markets.
Risk Warning: The masterclass is a platform for selected third-party compliance professionals to teach investment research theory courses. The content taught does not constitute buying or investment advice for any specific product. The opinions expressed in the platform courses are for learning and reference only and do not represent the opinions or views of Wall Street Insights, nor do they address the specific investment goals, financial situations, or needs of users. The market is volatile and uncertain, and the platform does not bear any responsibility for losses incurred by you relying on the opinions or information from the courses
Investment carries risks, please make decisions cautiously

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This article discusses the real situation of the commodity market through a conversation with Pei Fengke Chen Dapeng. It reviews his first encounter with the commodity industry in 2015-2016, emphasizing the misunderstandings about gold prices at that time and the lag in market reactions. Chen Dapeng shares his work experience at Zijin Mining, involving macro research, strategy research, and commodity investment, pointing out the diversity of market participants and different profit strategies, emphasizing that there is no single trading logic

- The article discusses experiences in the commodities market, particularly focusing on copper and gold trading.  
- It emphasizes the misconception that uniform trading logic exists among market participants and highlights the importance of understanding various perspectives in trading.  
- The author shares insights on market volatility, structural drivers versus cyclical trends, and the interplay of money supply and commodity availability, noting the risks of relying solely on traditional economic cycles.

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Clearing the Fog of Commodities to Understand the Real Market [Dialogue with Pei Fengke, Chen Dapeng, Part 1]