Gold prices remained stagnant through the fourth quarter, driven by COVID-19 vaccine breakthroughs and a weaker US dollar. These factors, alongside inflation expectations and declining real yields, are likely to keep gold prices positive in the near term.
“We’re hearing from economists around the world that US inflation is expected to rise in the coming months on the back of global economic recovery, supported by various governments’ fiscal and monetary stimulus initiatives,” says Jay Patel, EY Canada Mining & Metals Strategy and Transactions Leader. “With inflation pressures rising, we can anticipate continued demand for precious metals.”
At the same time, vaccine distribution, along with strong demand from China, are expected to positively support base metals prices in the near term. Base metals experienced sustained growth in Q4 2020 with copper prices up 16%, while nickel and zinc prices each saw a 14% increase.
“As we enter a new year and see economic recovery on the horizon, we’re optimistic that the industry will continue with its growth momentum,” says Jeff Swinoga, EY Canada Mining & Metals Co-Leader. “We’re already starting to see how expected government stimulus packages — such as China’s new five-year plan for greener production, Europe’s Green Deal and the planned package from the US — are driving sustainable infrastructure development and, in turn, greater demand for base metals like copper. Rare earth metals like nickel and cobalt are also benefitting from green-led initiatives, as the production of electric vehicles accelerates. ”