Weekly Mining Commentary

Author: Sid Rajeev, Head Of Research

Following last Monday’s announcement from Pfizer (NYSE: PFE), Moderna, Inc. (NASDAQ: MRNA) announced today that they have also received positive test results (94% efficacy) for their vaccine for COVID-19. Stock markets rallied on the news; the S&P 500 index was up 1.1% today vs 2.6% last Monday. As shown below, six of the seven indices we track are up WoW (orange bars). Four out of seven indices are trading higher than pre-COVID19 levels (blue bars).

Similar to last Monday, most sectors generated gains today, except for stay-at-home stocks, such as Zoom (NASDAQ: ZM), Amazon (NASDAQ: AMZN), and Netflix (NASDAQ: NFLX). The US$ also declined, but surprisingly, gold and silver were up slightly. As mention in our previous notes, demand for safe haven assets (such as the US$, gold and silver) typically rises when there is global economic uncertainty and vice versa. Copper and nickel continued to report WoW gains.

Copper inventory levels on the LME (London), and on the SHFE (Shanghai) declined WoW, implying that business activities are ramping up despite a record number of new cases of COVID-19 in the U.S., Canada and Europe.

Valuations of base metals increased, while that of gold declined in the past week.

Pfizer and Moderna’s announcements are highly encouraging, but their vaccines still need health approval and it will take some time to roll them out to the population. We believe market risks remain high. Even if their vaccines are successful, and the FDA allows for their emergency use, we believe there will be limited/rationed supplies of vaccines in the first few months. Therefore, it is unlikely we will see a sharp increase in economic activity in the next six months. We continue to expect a period of high volatility in the coming weeks. Our 2021 commodity price forecasts (unchanged) are shown below: