Weekly Mining Commentary

Global equity markets were up 0.5% last week (2.5% in the previous week). The U.S. Fed is meeting this week, and the market expects tapering to commence this month. Manufacturing activities contracted in both China and the U.S. last month (see chart below). Considering the weakness in key economic indicators, we believe rate hikes will be slower than market expectations, which will support both equity and commodity prices in the near-term.

 

Current Vs Pre COVID-19 ( as of Nov 1, 2021)

Source: FRC / Various

U.S Manufacturing

Source: Trading Economics

Commodity prices pulled back last week, amid a stronger US$. Inventory levels of base metals increased on the SHFE (Shanghai), but declined on the LME. We continue to believe that supply chain disruptions will support commodity prices in the near-term.

Source: FRC / Various

LME Inventory (Nov 1, 2021)

Source: FRC/Various

Source: FRC/SHFE

Valuations of both gold and base metal producers were down 3% WoW.

Gold Producers

Source: S&P Capital IQ & FRC

Base Metal Producers

Source: S&P Capital IQ & FRC

Source: S&P Capital IQ & FRC

Last week, three (previously two) out of the 15 hardest hit nations experienced higher daily new COVID-19 cases. Two countries (unchanged) experienced WoW increases in deaths. Globally, 49.50% have received at least one dose, up 0.84 ppt WoW vs 1.05 ppt at the same time last week. 74.27% of Canadians are fully vaccinated (0.7 ppt vs 0.8 ppt) vs 67.00% in the U.K. (0.2 ppt vs 1.0 ppt), and 57.22% in the U.S. (0.6 ppt vs 0.4 ppt).

Share of people vaccinated against COVID-19, Oct 31, 2021

Source: Our World in Data

Vaccination Rate

Source: Our World in Data / FRC

We are expecting dovish comments from the Fed this week, which will be positive for gold/silver prices. We are maintaining our price forecasts.

Source: FRC

Source: https://www.researchfrc.com/weekly-mining-commentary-90