Gold, Silver Take Back Seat To Base Metals, Cobalt Zinc At PDAC 2018
(Kitco News)- The mining and commodity sector is seeing investor sentimentpick up, but the focus is more on growing momentum in base metals with littleinterest in precious metals, according to the latest comments during the 2018Prospectors & Developers Association of Canada (PDAC) convention.
While presentations were standing room only duringpresentations on commodities like zinc, copper and cobalt, there were plenty ofempty seats during the conference’s precious metals outlook, from Metals Focus.
Mark Fellows, from the British research firm, said in hispresentation that he could see gold prices push above $1,400 by the end of theyear. He added that they see only a moderate rise in gold prices as the marketwill be driven by a relatively flat supply and demand fundamentals, offset by aweaker U.S. dollar and growing uncertainty in financial markets.
He said added that the key to gold prices remains investorinterest. As for the other precious metals, Fellows is less optimistic. Henoted that higher gold prices will reluctantly raise prices in silver and PGMmarkets.
Silver, in particular, he said he expects to continue tounderperform the gold market. He added that ultimately, weak investor demandwould lead to higher silver supply surplus and weight on prices.
Fellows noted that the solar industry is an excellentexample of the issues that are driving silver’s industrial component. While demandfor solar panels is expected to increase over the next few years, he noted thatthe silver component in the panels continues to drop.
Cobalt, Zinc AreDarling of PDAC
Paul Robinson, director at CRU Group, said that he isbullish on commodities as he expects the current expanding economic cycle tocause base metals to outperform precious metals in 2018.
“Most importantly, miners are cashflow positive, havereduced debt, and are now seeking investment opportunities. This is attractingother investors back to the sector,” he said during a presentation at theworld’s largest mining conference.
In particular, Robinson said that he is very bullish oncobalt as the metal faces production constraints in an environment of growingglobal demand. He explained that the growing electric car market would continueto drive demand for specific metals like lithium, cobalt and nickel.
Since the start of 2017 cobalt prices have risen almost141%, with spot prices last trading around 79,500 per tonne on the LondonMetals Exchange. During the same time frame, gold prices have risen almost 15%with April gold futures last traded at $1,321.70 an ounce.
While Robinson isn’t watching precious metals very closely,he said that there could be a long-term bullish case for gold as Chineseproduction is expected to fall as the Chinese government deals with its massiveenvironmental problems. Gold production in China fell last year because ofmines closures relating to cyanide in tailings.
“I don’t think people truly understand the impact Chineseenvironmental regulations will have on commodity production,” he said.
Robinson also said that he could also see higher gold pricesif China started reporting increases in its gold holds. He added that could bea sign that China is taking further steps to make the yuan a stronger reservecurrency, directly competing with the U.S. dollar.
“That would lead to further political instability and Icould see investors buy gold as a safe-haven,” he said.
While there is products for gold, Robinson said that hecould see silver continue to suffer as it doesn’t have positive long-termfundamentals.
“Silver is suffering because of the curse offundamental byproduct production,” he said. “Zinc prices have risen enough tobring new production to market and as a result, more silver will be produced asa byproduct.”
By Kitco NewsFor Kitco News
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