Weekly Mining Commentary
Global equity markets were up 2.1% last week despite rising U.S. treasury yields. Rising yields indicate that the market is expecting the Fed to hike rates in the near-term. Considering the weakness in key economic indicators, we believe rate hikes will be slower than market expectations. U.S. jobs and manufacturing data were weaker than expected in September, and consumer confidence has edged lower this month. In addition, China’s economy grew 4.9% in Q3 vs 7.9% in Q2. We believe inflation and slow rate hikes will provide near-term support to commodity prices.
Supply chain disruptions (primarily due to the ongoing energy crisis) continue to drive commodity prices. Both precious and base metals gained strength last week. Zinc prices were up 19%, despite higher inventory levels on the SHFE (Shanghai).
Valuations of gold producers were up 5% WoW; base metals producers were also up 5%.
Vaccination rates remain slow in developed economies: Last week, three (unchanged) out of the 15 hardest hit nations experienced higher daily new COVID-19 cases. Only one country (unchanged) experienced a WoW increase in deaths. Globally, 47.61% have received at least one dose, up 0.02 ppt WoW vs 1.88 ppt the same time last week. 72.79% of Canadians are fully vaccinated (0.7 ppt vs 0.8 ppt) vs 65.73% in the U.K. (0.5 ppt vs 0.3 ppt), and 56.24% in the U.S. (0.6 ppt vs 0.5 ppt).
We are raising our near-term price forecasts for base metals. As gold prices have been below expectations, we are lowering our forecast for H2-2021.