All four precious metals began 2020 above where they lay at the start of 2019, with the benefit of positive price momentum coming through December to year-end. Expectations for gold this year are for the COMEX settlement price to average US$1,481.34/oz in 2020, an increase of 5.5% from the 2019 average. December was a positive month for gold, which rose by 3.7% and pushed back through US$1,500/oz, in part as the U.S. dollar weakened. Silver is expected to post the strongest gains, with the 2020 average expected to rise by 10.1% largely on the back of gold's positive momentum. For both metals, prices have already passed the 2020 average level in the first half of January.
Platinum and palladium are expected to also see positive movement in 2020, by 8.8% and 5.5% respectively. The price target for palladium was the most heavily revised upward over December 2019, by 3.5% for 2020, yet this still left expectations far below the price movement of much of the last four months. In January, palladium has sailed through the US$2,000/oz mark to new successive record highs, backed by a strong fundamental story.
Turning to the base metals, important industrial copper should see prices on average higher year over year by 4.2%, driven by optimism in refined demand as the U.S.-China trade dispute begins to resolve early in the year. This should leave the copper market in a small refined surplus and copper prices continuing to follow an inverse relationship to the trade-weighted dollar.
Contributors are also bullish on nickel this year, with London Metal Exchange cash prices expected to rise 11.2% to average US$7.18/lb or US$15,835/t. This implies further upside from price levels at December-end, in line with our expectation of an increasing primary nickel deficit in 2020.
Zinc target prices are expected to stagnate on average throughout much of the next five years. Prices thus far in January have rallied somewhat but as of Jan. 9 were still below levels seen at the beginning of 2019 given the continued weakness seen in December. Weak demand indicators such as automobile output, and slowing fixed asset and industrial production growth coupled with rising smelter output lead us to believe that we will see a 96,000-tonne surplus in zinc in 2020. We therefore expect zinc prices to average US$1.05/lb, or US$2,310/t, in 2020, lower than consensus at end-2019.
Expectations are most bearish for iron ore, whose price is expected to average US$80/t, some 8.1% lower than 2019. Prices last year were driven sharply higher on curtailed supply volumes and, late in the year, were driven in conflicting directions sequentially — back down below the US$90/t level by news of the resumption of supply from Vale's previously suspended operations and driven to a four-month high by the announcement of the "phase one" trade deal between the U.S. and China in mid-December. Lessened trade tensions and recovering Chinese steel margins, offset by the return of Brazilian tonnages to the seaborne market, lead us to expect prices to average US$81.9/t in 2020.
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