Gold, USA, UK, Germany

Comments of particular interest are noted with ‘*’.  

Matau’s Comments:  

  • Base metals’ pinch-point graphs continue to show metal prices rising, in response to expectations of (stimulus driven) increased demand, and recognition of tight supply.   The markets are now looking toward base metals’ supply required for potential resumption of industries, supported by various stimulus packages (initially within China, the largest consumer of raw materials), and are beginning to recognise (a) the tightness of the supply, and (b) the risks that Covid in South America and Africa which could seriously limit supply responses, and frustrate other countries’ industrial resumption aspirations.
    • Current conditions exemplify the saw that “whenever you forecast something you will be precisely wrong!”  … what matters is:  why,  by how much; and in which direction. 
    • Copper appears to be responding with most clarity:  price, stockpiles. 
    • Zinc, Lead & Nickel are responding though fears of off-exchange stocks lurk, (real or not)
      • Ni has also to contend with Indonesian political ambitions regarding domestic added value.
    • Cobalt may be just starting to respond to expectations of EV demand … only on this week’s data though. 
  • Iron ore and coking coal demand remain firm with China’s surging steel output (and domestic demand, which is ahead of global ex-China demand at this stage).
  • Gold prices jumped again this week, in all (except EUR) the currencies that Matau tracks.  The USD had slumped somewhat but the gold price increase in USD terms (and other currencies was not due to FX changes.  
    • Oddly the conditions posed by Covid now have positive factors for both gold and equity markets:  both geopolitical risk & stimulus.
  • USA economic data still points to a soggy economy, at best.  The latest month of Covid-19 ‘advances’ are not in the June data. 
    • Yield curve terms suggest the market expects current economic conditions to persist for about 3 yrs. 
    • Electricity demand has shown that over past cycles that industrial demand falls in a crisis and usually does not fully recover, and the increase of residential and commercial seasonal demand tends to keep growing.
  • UK economic data (May) shows potential for bottoming in some segments though real recovery is yet to be realised.  All metrics remain negative yr-on-yr at this stage.
  • German durable goods orders have positive growth yr-on-yr though other segments remain negative growth … perhaps a step ahead of the English.

We live in interesting and challenging times!

SUMMARY  

*Copper  RIO gives detail on its large Winu Cu-Au deposit in the Eastern Pilbara.   

*Cobalt  Forecasts for spot prices to recover as sector demand recovers.

*Nickel  Indonesia’s ore export ban promised to miners then became a curse..

Zinc & Lead  Zn quandary:  stocks highest since 2018, but ShFE prices backwardated through Feb21.   

Tin  Fitch forecasts refined Sn output to fall then recover in 2020, subject to Covid-19.     

Aluminium  China saw strong imports in aluminium-related raw materials:  alumina & bauxite.

*Gold  Numerous geopolitical and economic factors to support Au.  USD Reserve currency status at risk? 

Platinum & Palladium  Slump in demand for autos pressures prices.  Potential for Pt to back-substitute for Pd.

*Oil  Oil prices need global oil demand to increase in order to move higher.  May take some time.

Coal  Indonesia reduces its shipping & insurance regulations.  China’s import backlogs catch up. 

Iron Ore  Margins between lump & fines ore squeezed  by high lump inventories at China ports. 

Shipping  Capes & Panamax demand declined this week, with contributions from bad weather.  

General 

*World Gold – demand – supply:  Jewellery demand collapsed in May-June, offset by ETFs

United Kingdom – Industrial Production, Manufacturing, Electricity & Gas:  Yet to show recovery.

Germany – Industrial Production, Durable Goods, Construction:  Durables recovering, other elements , not just yet.

*USA – Yield Curves:  Terms suggests an outlook that it may be 3 years before economy improves. 

*USA – Electricity End-Use:  Industrial & Commercial usage (April) was lowest since 2000.   

*USA –  Durable Goods, Vehicles, Electronics & Computers:  Subject to ongoing Covid-19 spread rates