Weekly Mining Commentary

Author: Sid Rajeev, Head Of Research

Global equity markets remained relatively flat in the past week, after delivering multiple consecutive weeks of gains. The U.K. started vaccinations last week. The U.S. started today, and Canada is expected to start next week. Four of the seven indices we track are trading higher than pre-COVID19 levels (blue bars).

Current Vs Pre COVID-19 (as of December 14, 2020)

Source: FRC / Various


Except zinc and nickel, all the other mainstream metals, and the US$, reported losses or stayed flat in the past week. Copper prices stalled for the first time in several weeks. We were expecting copper prices to decline, triggered by an unexpected increase in inventory levels in the week prior to last.

Week-over-Week and Year-over-Year (December 14,2020)

Source: FRC / Various

Valuations of both gold and base metal producers remain unchanged.

Gold producers December 14,2020

Source: S&P Capital IQ & FRC

Base Metal Producers December 14, 2020

Source: S&P Capital IQ & FRC

Gold Producers and Base Metal Producers

Source: S&P Capital IQ & FRC

Although inventory levels of copper were up on the SHFE in the week prior to last, levels declined on both the LME and the SHFE (Shanghai) last week.

LME Inventory (Dec 14, 2020)

Source: FRC/Various

SHFE Inventory (Dec 11,2020)

Source: FRC/SHFE

China’s strong economic recovery is the primary reason for declining inventory levels of base metals. As shown below, China’s manufacturing index hit record levels in November.

China’s Manufacturing Index

Source: Tradingeconomics

As the rollout of vaccines is expected to take three to six months, we do not expect the global economy to recover to pre-COVID levels until mid-2021. Except India, most of the hardest-hit nations experienced a surge in new cases last week. This implies that restrictions are unlikely to be relaxed until there is a decline in new cases.   

Daily New Cases in the US, India, Russia, UK, Italy, Germany

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


We continue to expect gold prices to remain volatile, and base metal prices to be under pressure in the coming weeks. Our commodity price forecasts (unchanged) are shown below:

FRC Forecasts

Source: FRC

Weekly Mining Commentary

Author: Sid Rajeev, Head Of Research