Weekly Mining Commentary

Author: Sid Rajeev, Head Of Research

Global equity markets rallied today as Pfizer (NYSE: PFE) announced highly encouraging test results (90% efficacy) of its vaccine for COVID-19. The S&P 500 index was up 2.6% today. As shown below, every single index we track is up WoW (orange bars). Four out of seven indices are trading higher than pre-COVID19 levels (blue bars).

Current Vs Pre COVID-19 (as of Nov 9, 2020)

Source: FRC / Various

Although most sectors generated positive returns today, a few sectors/assets were negatively impacted, namely the US$, gold/silver, and stay-at-home stocks such as Zoom (NASDAQ;ZM), Amazon (NASDAQ: AMZN)   , and Netflix (NASDAQ: NFLX). Note that demand for safe haven assets (such as the US$, gold and silver) typically rise when there is global economic uncertainty and vice versa. Not surprisingly, base metals gained strength. Copper and zinc are now trading higher than pre-COVID levels.

Week-over-week (Nov 9, 2020) and Year-over-Year (Nov 9, 2020)

Source: FRC/Various


Although inventory levels of base metals remained flat on the LME (London), copper and nickel levels on the SHFE (Shanghai) declined WoW, reflecting demand from China.

LME Inventory (Nov 9, 2020)

Source: FRC / Various

 

SHFE Inventory ( Nov 6, 2020)

Source: FRC/ SHFE

Inline with global equity indices, valuations of both gold and base metal producers gained in the past week.

Gold producers chart in November 9, 2020

Source: S&P Capital IQ & FRC

Base Metal Producers in November 9, 2020

Source: S&P Capital IQ & FRC

 

Gold Producers and Base Metal Producers

Source: S&P Capital IQ & FRC

The announcement from Pfizer is a huge relief as Europe, Canada, and the U.S. are experiencing a record number of daily new cases. Most major economies in Europe have implemented lockdowns or restrictions. However, note that the number of deaths as a percentage of active cases has been lower in the second wave, indicating that everyone is better equipped this time.

Daily New Cases in the United States and India

Source: https://www.worldometers.info/coronavirus/

Daily New Cases in Russia and in France

Source: https://www.worldometers.info/coronavirus/

Daily New Cases in Italy and United Kingdom

Source: https://www.worldometers.info/coronavirus/

Although Pfizer’s announcement is highly encouraging, the vaccine is still in early stages, and we believe market risks remain high. We believe that markets overreacted today by taking stock market indices to higher than pre-COVID levels. The sharp decline in gold prices today is an indication that gold will face downward pressures with a global economic recovery. We are expecting a period of high volatility in the coming weeks. Our 2021 commodity price forecasts, introduced in this report, are shown below:

FRC Forecasts

Source: FRC

Weekly Mining Commentary

Author: Sid Rajeev, Head Of Research

Source:https://www.researchfrc.com/weekly-mining-commentary-40/