Consensus price forecasts – Base metals buoyant; precious dip on hawkish Fed

S&P Global Market Intelligence discusses consensus price forecasts for industrial metals and precious metals, including platinum group metals, amid broader market trends. Base metals prices continue to be buoyed by constrained supply — mined, refined and seaborne — while the determinedly hawkish stance of the U.S. Federal Reserve weighs on gold and silver prices.

The year began amid rising inflation worldwide, and central banks have taken different stances. While the Fed has firmed its intention to raise interest rates, China's central bank has again loosened its reserve-requirement ratio and cut its benchmark lending rates. The prospect of higher interest rates caused the U.S. dollar index to rise above 97.3 on Jan. 27 for the first time in 18 months, although this might imply lower gold prices in the near term. Base metals prices remained elevated in January, although their direction will depend on energy supply scenarios in Europe in the framework of the Russia-Ukraine conflict. Iron ore prices have rallied, as the announced monetary easing by Beijing fueled hopes for increased demand.

The year began amid rising inflation worldwide, driven by surging energy prices in Europe, labor shortages, supply chain disruptions and pent-up demand for commodities. Central banks have taken different stances in the face of record-high costs of living and stalled economic recoveries. While the U.S. Federal Reserve has affirmed its intention to raise interest rates in 2022, China's central bank has again revised downward its reserve-requirement ratio in an effort to revive its flagging economy, and has cut its benchmark lending rates again to spur consumer spending.

The outlook for the gold market is mixed, however. A rising U.S. dollar index could weigh on prices, while elevated inflation worldwide may cause market participants to turn to gold as a safe haven, which would sustain prices. Base metals prices remained elevated in January, and their direction will depend on energy and metals supply scenarios in Europe. Should the intensifying border tensions between Russia and Ukraine result in lowered energy or metals supply to Europe, metals prices would be expected to remain strong. But if the high energy prices retreat, metals prices should follow suit. Iron ore prices rallied during the month as the announced monetary easing by Beijing fueled hopes for increased demand, while omicron-led labor shortages in Australia and weather events in Brazil curtailed seaborne supply.

Despite the month-over-month drop in the COMEX gold price as of Jan. 31, the yellow metal has held steady over the past year and may very well stand its ground above the $1,800-per-ounce level in the coming months. The Fed's hawkish stance amid multidecade-high inflation reinforces gold as a safe haven and may temper any steep drop in prices. Changes to consensus gold price forecasts were minimal, with a mere 0.1% average annual upgrade through to 2025.

Silver prices outpaced gold on their monthly downtrend, with the COMEX settlement price 4% lower at end-January. The outlook is somewhat positive in the near term, however, as the ramped-up push for green energy technology deployment spurs industrial demand. Consensus prices have therefore been upgraded 0.9% annually between 2023 and 2025.

The platinum consensus price forecast was downgraded 0.4% on average annually over the forecast period, although prices are expected to rise steadily as recovery in the auto manufacturing sector drives demand in the years ahead. Palladium was the only precious metal to benefit from an average annual consensus price forecast upgrade, spurred by a 23% month-over-month increase in the NYMEX settlement price as of end-January. Prices will nevertheless remain on a downtrend through to 2026, as the phase-out of internal combustion engine vehicles and rising substitution by platinum in catalytic converters lower demand for palladium.

Copper started the year strong with London Metal Exchange prices on the rise, bolstered by the stimulus injected into China's economy. The more expansionary monetary policy will help revive China's debt-laden property sector — the country's biggest copper end user. Moreover, increasing electric vehicle sales and deployment of renewable energy technologies will sustain demand worldwide. Supply is expected to keep lagging demand, however, with the refined copper market in a forecast growing deficit in 2023-26, and mined output periodically threatened by disruptions from environmental, social and governance issues. Copper prices should remain stable at historically high levels, with the consensus forecast upgraded an average of 3% annually over the forecast period.

Refined supply issues sustained strong zinc prices in January, as high energy prices in Europe and power restrictions in China curtailed smelter output. On the mined supply side, recent disruptions will further constrain output. Despite weak demand indicators in China, a stabilizing real-estate market, supported by the looser monetary policy, and a recovering auto-manufacturing segment as the electronic chip supply crunch eases, might spur near-term demand growth. Squeezed supply and pent-up demand have led to the second-highest average annual upgrade in consensus price forecasts, of 8.3%, and the highest annual increase, of 15.5%, in 2026.

The LME three-month nickel price surged to an 11-year high in January as stocks fell to their lowest levels in three years on Chinese restocking ahead of the Lunar New Year. A cooling market due to the holiday and the upcoming Beijing Winter Olympics, combined with expected growth in Indonesian supply, are forecast to bring prices down as the year progresses, with the market ultimately moving into surplus. The intensifying conflict between Russia — one of the world's largest nickel producers — and Ukraine, however, may lead to sanctions being imposed on the former, which would provide downside risk to both mined and primary nickel supply growth. Consensus nickel prices were nevertheless consistently upgraded across the forecast period, by an average of 3.7% annually.

Cobalt prices have been on a yearlong upward trend on persistent supply-chain challenges and overall refined market deficit. Demand growth from batteries, namely for EVs, has consistently outpaced supply. Specifically, exports from major producer Democratic Republic of Congo were curtailed by COVID-19-related disruptions and lockdowns at Durban Port in South Africa. Passenger plug-in EV sales in 2021 bucked the broader auto market trends, more than doubling as countries strove to meet their reduced emissions targets. With battery production on the rise and expected to keep expanding over the forecast period, and despite an expected easing in the supply chain and projected supply growth buoyed by the restart of Glencore PLC's Mutanda mine in 2022, consensus price forecasts for cobalt were upgraded across the board. Increases to the consensus forecast prices ranged from 14% in 2024 to 7.5% in 2026, with an annual average of 10.3% — the highest in this month's report.

Iron ore is on a path of recovery, with the NYMEX settlement price up 15% between Dec. 31, 2021, and Jan. 31. Prices were buoyed by a seasonal squeeze in supply, Chinese restocking ahead of the Lunar New Year holiday and optimism for improved Chinese demand in March. The more accommodating monetary policy is expected to cascade through various sectors of the Chinese economy, including its debt-laden property segment that had been weighed down by the Evergrande default at end-2021, which would stoke demand for iron ore. From the supply side, seasonal weather is expected to constrain seaborne exports in the first quarter, with recent heavy rainfall at Vale SA's operations having already tempered shipments from Brazil. Despite a steady decline in prices, consensus forecasts were upgraded an average of 1.5% annually through to 2026.

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