Monthly Metal Review
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
September saw slides in virtually every sector of the global economy as political uncertainties left markets in a state of high anxiety all month. Clearly base and precious metals markets were by no means immune from the friction.
The same political posturing on both sides of the Atlantic that marked August carried over through all 30 days of September. The risk of renewed recession remained uncomfortably high throughout the month. European debt, with Greece yet again on the verge of default, remains the latest potential "straw that breaks the camels back"-- the event that could upend a global economy on a recessionary tipping point.
Confidence of individual investors and business leaders in the long-run coherence of Europe and the US on the fiscal and monetary fronts has been injured by the political wrangling on both sides of the North Atlantic. It remains to be seen how deeply this lack of market confidence will spread to the real economy.
September was a month of correction for the formerly surging non-ferrous and precious metals markets in particular. Virtually every commodity in this market lost value over the last thirty days. Short term double-digit drops in Copper, Zinc, Lead and Nickel can be attributed variously to slowed growth in Asia due to the economic uncertainty or to potential corrections in overheated commodities markets; copper, for instance, tumbled 20 percent in September. Meanwhile, even gold and silver-- precious metals whose prices have the benefit of not having to reply on real-world industrial demand-- fell this month amidst the market uncertainty. This inspite their appreciation over several months as they were encouraged by several factors, not in the least the fears of the global economic resection and the seeking for safer havens. However as the London Bullion Association Conference was taking place in Montreal this month most investors and analysts expect the gold price to breach $2,000 an ounce next year even possibly reaching S2,019 per ounce in November of 2012. Nevertheless the precious metals felt the chills of this month along with the other metals.
Despite this month of drops, many remain confident in the long-term prosperity of the metals commodities markets. Traders expect gold, silver and nickel to stay strong through the year. Strategic supply tightening by mining giants in Indonesia and elsewhere should stabilize the price of zinc and copper.
Investors have been heartened by positive signs out of Lima, Peru, where the ascendancy to president of former military man Ollanta Humala has gone smoother than once feared. The little-known Humala's unexpected victory earlier this year lead to a record selloff on the Lima stock exchange. Peru is the world's second-largest producer of copper, silver and zinc and the world is keeping an eye on their developments.
Brazil's September overhaul of its mining code will likely double that government's average royalty rates for minerals. The overhaul makes the permitting process for new mines more rigorous and there is talk of a 100 percent increase in tax, from 2 percent to 4 percent. The changes are likely to have the biggest impact on Rio de Janeiro-based mining giant Vale, the world's largest producer of iron ore and a leading producer of nickel and copper. Industry leaders say higher royalty rates will make the industry uncompetitive unless the government lowers the country's overall tax burden.
The September slump across all markets reflects the true global nature of the economic problems we face. To "say" that one understands the interconnected nature of the world economy in boom times is one thing. To see that same world economy stalled negatively affected by this interconnectivity in bad times is quite another thing to behold. An organized, comprehensive response from world governments-- particularly those in Europe and North America-- could go a long way toward freeing up the markets.
Investors have long been comfortable with the idea that what happens in London or New York affects trade in Beijing and Tokyo. Now, they must consider that what happens in Athens or Berlin could greatly impact what happens the world over.