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Base metals prices rebounded in July as the economic recovery buoyed investor optimism about the global demand outlook and shrugged off concerns over the spread of the coronavirus delta variant. The increasing number of COVID-19 cases, however, has subsequently weighed on prices in early August. In July, strong demand, falling stocks and a supply squeeze drove London Metal Exchange nickel cash prices to their highest level since May 2014, while supply disruptions and a softer U.S. dollar underpinned higher prices for copper and zinc. Following a record June quarter, iron ore prices dipped to a three-month low amid Chinese government calls to curb domestic steel production to aid its decarbonization drive. Gold prices strengthened after a weaker dollar and sliding U.S. bond yields were triggered by the recent dovish tone from the U.S. Federal Reserve.
COMEX gold prices ended July at $1,814.50 per ounce, up from $1,771.60/oz June 30. The weaker U.S. dollar helped to boost gold prices in late July, after Fed Chairman Jerome Powell indicated that the U.S. job market still had some way to go on the recovery path before the U.S. central bank would move to tighten monetary policy to combat rising inflation. With U.S. interest rates expected to remain on hold in the near term, this buoyed investor demand for non-yielding bullion. In response, the consensus price forecast for gold was revised 0.8% higher in 2021, although an improving risk appetite and the prospect of stimulus tapering down the line capped upgrades to 0.3% in 2022 and 2023.
Silver prices eased back to $25.55/oz July 30, dampened by the return of a broader appetite for risk among investors and lower-than-expected purchasing managers' index data for U.S. manufacturing. With their respective prices heading in opposite directions, the gold-silver price ratio increased to 72.9 July 27, the highest since Jan. 27. Declining bond yields offset some of the downward pressure on silver prices in July, however. With silver able to ride both sides of the coin — benefiting from its safe-haven status and the recovery in global industrial output — consensus silver price forecasts average 0.8% higher across 2021 to 2025.
Spurred by the wave of global recovery optimism, platinum prices moved higher through the first half of July before pulling back to finish the month down 2.1%, on concerns over the spread of the coronavirus delta variant potentially derailing the economic recovery. Consensus price forecasts for platinum average 2.6% lower across 2021 to 2025, dampened by the prospect of weaker demand over the medium term in EU diesel car sales; platinum is a key feedstock in diesel catalytic converters. Following a strong start to July, palladium prices were 4.4% lower by month-end. The underlying supply tightness could be exacerbated by renewed lockdown restrictions in South Africa, which helped to lift the consensus price forecast for palladium 2.3% in 2021.
Demand optimism and supply tightness drove LME copper cash prices up to $9,747.50 per tonne July 30 from $9,042.50/t June 21. Further price increases could be in the offing, with a supply crunch brewing after unionized workers at BHP Group's Escondida mine in Chile recently rejected the company's latest wage offer and voted to go on strike. Recent blockades by protestors in Peru disrupted supply from MMG Ltd.'s Las Bambas mine, although port stockpiles helped to support exports of concentrate. Upgrades to consensus copper price forecasts average 2.4% for 2021-23 and 9.8% for 2024-25 as huge incentives directed to infrastructure and a greener global economy bode well for copper demand growth, while calls from governments in Chile and Peru to raise mining taxes could negatively impact supply.
Late July saw LME zinc cash prices surge back above $3,000/t in response to a weaker dollar and robust global macroeconomic data. Investor sentiment was supported by news of manufacturing recoveries in Europe and the U.S., while ongoing power cuts in China's Yunnan province — home to several major zinc smelters — constrained zinc supply. This countered the impact of July's release of Chinese state reserves of zinc aimed at curbing the rise in prices. Annual upgrades to consensus zinc price forecasts average 1.7% across 2021 to 2024, with the global demand recovery expected to reduce the zinc market surplus.
LME nickel cash prices rose to a seven-year high of $19,892/t July 30, as strong fundamentals drove stocks down. The global economic recovery's support of demand for consumer goods is having a positive impact on nickel prices, which are up from $16,009/t April 22. Robust Chinese stainless steel production and recovery-related fiscal stimulus in Europe are driving nickel demand. Meanwhile, supply disruptions resulting from strike action at Vale SA's Ontario Division operations in Canada, and local protests at Glencore PLC's Koniambo smelter in New Caledonia, have helped to reduce the surplus in the nickel market. Bolstering positive investor sentiment was news of Tesla Inc. signing an agreement with BHP for the supply of electric vehicle battery-grade nickel. In response, consensus nickel price forecasts have seen average increases of 2.7% across 2021 to 2023.
Supply disruptions helped LME cobalt prices rally in July before they stabilized as demand waned. A third wave of COVID-19 infections in South Africa has triggered renewed lockdowns, helping to slow the flow of cobalt supply from the Democratic Republic of Congo. The supply squeeze was exacerbated by a temporary suspension of operations at the port of Durban — Africa's main cobalt export terminal — after protests over the jailing of former South African President Jacob Zuma widened into civil unrest. Consensus price forecasts for cobalt average 0.2% lower for 2021 to 2025, however, with the restart of Glencore's Mutanda mine in 2022 set to boost supply. Sentiment was further negatively affected by news that SVOLT Energy Technology Co. Ltd.'s recently started production of cobalt-free nickel-manganese batteries for electric vehicles at its plant in China.
News that the Chinese government is considering imposing a tax on steel exports, together with weaker Chinese demand, dragged the S&P Global Platts IODEX 62% Fe iron ore price down to $180.50/t July 30. The Chinese government has ratcheted up pressure on domestic steel mills to cut output, after recent flooding heightened sentiment toward China's decarbonization drive. The prospect of slower Chinese steel supply in the second half will be offset, however, by a strong recovery in ex-China iron ore demand. With the global seaborne trade deficit expected to deepen this year, consensus price forecasts for iron ore have increased 9.9% year over year in 2021 and are 3.6%-7.7% higher for 2022-24. Given the expectation for a sluggish response in iron ore supply growth, seaborne trade deficits are projected to persist over the medium term.
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Consensus price forecasts — Gold prices rise on Fed's dovish stance
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