As the global tightening cycle is expected to come to an end in the coming months and thus end, the pressure exerted on the likes of gold, which has no yield, should start to dissipate. Equally, the global macro backdrop is uncertain and should prompt investors to seek safe haven alternatives, boosting bullion. Platinum prices are underpinned by demand shortage fears which are unlikely to dissipate in the near term as it is related to the extraction of the metal in South Africa, which is facing increasing electricity supply challenges.




China’s April industrial output and retail sales growth fell short of expectations, indicating a loss of momentum in the economy at the start of the second quarter. The data raises concerns about the country’s post-COVID recovery. Given that China is the predominant consumer of base metals, a slowdown here will be factored into the demand side of the equation.






Precious Metals


Spot gold has fallen below $2000/oz after rising to a record high of $2062.99/oz on the 5th of April 2023. Gold remains underpinned by strong fundamentals, and even though the debt ceiling talks are causing mild movements, the broader narrative of global economic risk remains embedded and thus, we do not see gold falling massively from current levels, at least in the near term.


Our view: Many of the US macro numbers have come in stronger than expected, leading to perceptions that the Fed will probably not pause in June, and the spectre of higher rates is bearish for gold. Therefore, in the coming weeks, we could see gold prices remain below $2000/oz. If spot gold continues on its downward path the next level we could see come into play is the 100DMA at $1933.19/oz.




Three industry reports released on Monday predicted that the global platinum market will experience its largest deficit in years due to rising demand from automakers, industry, and investors. This shift is driven by automakers switching from palladium to platinum, the increasing production of platinum-intensive heavy-duty vehicles, and the emergence of exhaust-free electric vehicles. In contrast, the palladium market faces a smaller deficit. Platinum prices are showing signs of recovery, while palladium prices have fallen sharply in recent months. These projections indicate a significant change in the dynamics of the platinum and palladium markets, with potential implications for their prices.

The reports highlight a shift in fortunes for platinum and palladium, both commonly used in vehicle exhausts to neutralize harmful emissions. The increased demand and undersupply of palladium led to higher prices in the past, while platinum prices remained low. However, the rising demand for platinum, along with consumption by industry and jewellers, is expected to result in a significant deficit in the platinum market. The varying projections among the reports emphasize the complex nature of forecasting and the different methodologies employed, but collectively point towards a notable shift in the supply-demand dynamics of these precious metals.

Our view: As demand for platinum rises, we are likely to see the price remain elevated. The next level to keep an eye on is the 2022 high of $1183.16/oz.


Industrial Metals


Base metals have the following factors driving price action:

  1. Slower recovery in Chinese economy than expected
  2. Global economic slowdown
  3. Limited investments in new projects


China: One of the latest setbacks came from the Chinese property market, where home-price growth in April slowed down. This adds to the diminishing optimism surrounding China’s reopening and contributes to the downward pressure on copper prices, along with concerns about a recession in the US and elsewhere. China is the world’s largest metal importer and therefore, if the economy’s growth is slow, demand for growth is likely to remain weak, keeping prices low.



Global economic slowdown: The outlook for commodity markets in the first quarter of 2023 suggests lower prices are expected due to the global economic slowdown. The reduced economic activity has resulted in weaker demand for commodities across both the energy and metal counters. This decline has been driven by various factors, including trade tensions, geopolitical uncertainties, and the impact of the COVID-19 pandemic on global trade and supply chains. As a result, commodity prices are expected to experience downward pressure in 2023. The challenging market conditions highlight the need for careful monitoring and strategic decision-making for businesses operating in the commodity sector.



Investments: Insufficient production volumes of metals pose the greatest risk to price stability in 2023. Investments in new mining projects remain limited, which could potentially lead to supply disruptions in the coming months. Major mining companies, such as Freeport-McMoRan and Alcoa, have expressed concerns about inadequate investment and potential supply shortages. Shortages of non-ferrous metals could particularly impact industries focused on renewable energy and battery production. Steel and aluminium price pressures may also affect automotive, aerospace, machinery, and construction sectors, as these industries allocate a significant portion of their total costs to basic iron, steel, and non-ferrous metals. Higher metal prices would increase operating costs and could squeeze companies’ profit margins.

In South Africa, the mining sector’s outlook remains challenging amid persistent structural impediments. A weaker rand helps exporters, but the flip side is uncompetitive input costs, poor public infrastructure, and an uncertain policy environment. Enormous capital outlays need to be made by miners to secure productive ability in the face of Eskom’s current crisis. Continuous power outages have reinforcing the reality that South Africa is an unattractive jurisdiction to deploy new exploration investment. Declining investments into the mining sector is likely to be an issue that starts to impact the production of metals across the world.



The global refined copper market has seen a 332,000 tonne surplus in the first quarter, compared with an 8,000 tonne surplus in the corresponding period last year, the International Copper Study Group (ICSG) said in its latest monthly bulletin on Tuesday. World refined copper output rose 7.5% in the quarter to 6.69 million tonnes, while usage was estimated 2.3% higher at 6.35 million tonnes, the ICSG said. The demand weakness is also evident in inventories held by the London Metal Exchange, which have almost doubled since mid-April. Therefore, with the global supply of copper rising, we will likely see copper prices continue to fall.


Our view: 3m LME copper fellow below $8000/tonne for the first time since the 29th of November 2022, extending this week’s decline on subdued Chinese demand and concern over global economic growth that analysts expect to weigh on prices in the coming days. The long-term outlook for copper remains bullish as increased demand for green energy is likely to keep global demand for the red metal elevated. However, in the short term, concerns about China’s economy are currently dominating the market.


Iron ore

Dalian and Singapore iron ore futures saw significant gains, reaching their highest levels in over three weeks last week Wednesday. The trend in iron ore seems to be on an upward path for the last few days, as sentiment has started to improve following the announcement from the Chinese government that they will be providing more financial stimulus measures. However, the question is how long the metal can hold onto these gains as some mills in China are planning to restart operations amid improved margins, and this will put downward pressure on steel prices given that the market is approaching an off-demand season.


Our view: Iron ore futures have been falling for the last five consecutive days as the market braces for a demand lull during China summer and the end of the peak construction season. In the long run, iron ore prices should rebound; however for the time being, we are likely to see the decline continue. Dalian iron ore has fallen to $689.00/tonne, pulling back from this year’s peak of $874.00/tonne in March 2022.



China’s aluminium output in April declined by 1.2% compared to March, as power restrictions in the southwest region limited metal production. According to data from the National Bureau of Statistics, China produced 3.33 million tonnes of aluminium last month, a slight increase of 0.8% compared to the previous year but a decrease from March’s output of 3.37 million tonnes. Yunnan province, which accounts for approximately 12% of China’s total aluminium capacity, has been grappling with power constraints due to low rainfall and water levels, prompting authorities to request production cuts from aluminium producers since September.

Our view: While daily output in April saw a slight improvement, the constrained supply failed to boost prices, as demand for the metal remained sluggish amid a slower-than-expected economic recovery and sluggish exports in China. The price of 3m LME aluminium has fallen to $2227.00/tonne which is low compared to the 2023 peak of $2658.00/tonne, which was reached at the end of January.