Resource World Magazine

D E C E M B E R / J A N U A R Y 2 0 1 7 www.resourceworld.com 13 GOld One of the key drivers for gold prices this year has been the return of specu- lative buying, much of it in Exchange Traded Funds (ETFs). According to the World Gold Council, "Huge ETF inflows during the first six months (+579 t) were counterbalanced by anemic jewellery demand in an environment of sharply rising prices." In the meantime, Indian and Chinese jewellery consumption year- on-year for the third quarter was down 41% and 27% respectively, most likely due to higher prices in their respective currencies. Trump's presidential victory in the United States could well be highly inflationary given his emphasis on fiscal stimulus including potentially massive def- icit spending. Despite some post electoral weakness in gold, its long-term prospects remain solid, with a strong inflation bias supporting prices during the upcoming Trump administration. silVer Silver has lived up to its reputation as being the most volatile of the precious met- als. Don't expect that to change. Silver's price soared in the first half of 2016, fueled by increased investor interest in silver as a safe haven asset and as leveraged expo- sure to gold's impressive price rally this year. Accumulation was impressive in both physical and paper markets. In the first half, exchange traded product holdings reached a record level of 662.2 Million oz although price-sensitive physical demand weakened. By mid-year, net long positions in COMEX silver futures reached a record 80,522 contracts. CObalT A high-strength, strategic industrial metal, cobalt is used in products from recharge- able batteries to aircraft engines. The Democrat Republic of the Congo accounts for 65% of global mine supply – a sig- nificant amount by artisanal miners. Most refining is based in China. By-product out- put, which accounts for 80-85% of global production, is primarily driven by devel- opments in copper and nickel. Additional copper supply entering the marketplace means additional cobalt supply, which can negatively impact prices. Cobalt is mined from nickel-cobalt laterite deposits which have higher capital and processing costs relative to sulphide deposits. COpper Copper is truly a bellwether metal in the base metals sector. China is the leading global consumer of copper, accounting for about 45% of world demand; so economic conditions in China – especially steel pro- duction – weigh heavily on prices. World mine production is expected to increase by around 4% in 2016, reaching 19.9 Mt, the result of new and expanded capacity brought on stream in the last two years. Despite the prospect of new supplies reaching the marketplace, copper has been moving higher (US $2.55 on November 11) with other industrial minerals including coal. ZinC After years of higher price projections, zinc is facing a growing supply deficit and shrinking inventories, boosting prices to the highest level in almost six years. The International Lead and Zinc Study Group projects world mine production will fall by 5.6% to 12.47 million tonnes in 2016 before recovering by 5.9% in 2017. It expects the supply of refined zinc metal will be constrained by a sharp reduction in the availability of zinc concentrates and that global usage in 2016 will exceed pro- duction by 349,000 tonnes resulting in a further draw down of both reported and unreported stocks. lead Global demand for refined lead metal is forecast to rise by 2.8% to 11.19 million tonnes in 2016 and a further 1.3% to 11.34 million tonnes in 2017, the Study Group projects. In 2016, supply in the global refined lead metal is expected to exceed demand by 42,000 tonnes. An even closer balance is predicted in 2017 with current data indicating that the market will be in surplus by 23,000 tonnes. Strong demand from the Chinese and European auto indus- tries are expected to support growth for lead. plaTinUM & palladiUM Sentiment towards platinum has been neg- atively affected by a slowdown in world economic growth, increased uncertainty in the key Chinese market, and a recovery in South African supplies. In 2016, platinum recovered from lows of below US $820/oz in January to over $1,000 today. Johnson Matthey believes the market should remain in significant deficit in 2016. The palla- dium market moved into balance this year due to a strong recovery in South African

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