Weekly Mining Commentary
Global equity markets were down 3.0% last week (up 0.7% in the prior week) after the Fed raised its benchmark rate by 0.5% – the highest hike in 20+ years. The S&P 500 was down six weeks in a row, and the US$ was up 5% in the past six weeks amid rising yields. As the Fed has signalled additional rate hikes this year, we are expecting continued downward pressure on equity markets, especially considering that the U.S. economy contracted 1.4% in Q1-2022. The S&P 500’s P/E is currently at 20.2 (21.0x last week) vs the historical average of 16x. As markets tend to overreact (during both bull and bear markets), we recommend keeping your war chest ready for buying the dip.
Source: FRC / Various
Prices of mainstream metals declined last week as well.
Valuations of gold producers were down 4% last week (down 2% in the prior week); base metal producers were also down 4% (flat in the prior week).
As mentioned last week, we believe COVID-19 is in the rear-view mirror of most countries except China. None of the 15 nations with the most cases experienced higher daily new cases of COVID-19 or deaths.
Stringent lockdowns and weaking global demand resulted in a significant slowdown in China’s exports last month. Despite weaking global demand, we continue to believe that supply-chain disruptions will support near-term prices of base metals. We are maintaining our price forecasts.