The sector has witnessed significant price volatility, even in the gold market. Price volatility has been influenced by various factors, such as slowing investor demand, an announcement by Russia of a COVID-19 vaccine breakthrough, sluggish demand and movement in the US dollar. Gold exchange traded funds witnessed net inflow of around 39 tonnes and 21 tonnes in August and mid-September, respectively, albeit at their slowest pace for 2020, reflecting a slowdown in investor demand for gold.
India and China, which account for around 50% of global demand, witnessed a decline in demand of 70% and 29% year on year, respectively in Q2 2020 on account of COVID-19 restrictions and increased gold prices.1
Central banks globally sold net 12.3 tonnes of gold in August, resulting in a net decline in central bank gold holdings for the first time in the last year and a half. Uzbekistan sold the largest quantity of gold, exporting around $5.8b worth in the first eight months of 2020.2
Iron ore prices reached a six-year high of around US$131/t in the first week of September, driven by a recovery in the Chinese economy coupled with supply disruptions. Export volumes from Brazil, the second-largest exporter of iron ore after Australia, declined due to a surge in COVID-19 cases in the country. Chinese iron ore imports grew by approximately 25% year on year in July on the back of strong demand from the steel industry, recovery in housing starts and infrastructure investments.3 Prices witnessed a correction towards the end of September on account of expected improvement in supply and lower than expected stainless steel demand.4
Nickel prices recovered from the weakness witnessed since the global COVID-19 outbreak and reached their November 2019 levels in August, driven by recovery in demand from China’s stainless steel industry. The prices witnessed volatility in September on account of movements in the US dollar and stock markets.5