Worried about your resources portfolio in 2024?<\/p>\n
Here\u2019s the good news from Sprott\u2019s market strategist Paul Wong and ETF product manager Jacob White, who are predicting a better year for copper and exceptional times for uranium, gold and silver.<\/p>\n
In a mid-January note Wong and White said <\/a>the new renewable energy\/EV-led commodity supercycle would continue to boost metal consumption again in 2024.<\/p>\n Like 2023, increased supply could lead to modest surpluses but geopolitical factors \u2013 like mining disruptions and resource nationalism \u2014 could undermine these surpluses quickly.<\/p>\n Political tensions in general will play a huge role in metals markets this year, according to Wong and White.<\/p>\n \u201cGeopolitical tensions appear set to rise, especially with a slew of critical elections in 2024 (over 60 countries and more than half of the world\u2019s population will be going to the polls),\u201d they say.<\/p>\n \u201c\u2026with\u00a0well-known and large-scale risks like escalating Middle East tensions, the Russia-Ukraine war, China\u2019s property market crisis and tensions with Taiwan, and the U.S. national election, the safe haven attributes of precious metals may become more attractive.\u201d<\/p>\n \u00a0<\/p>\n The copper market fluctuated throughout 2023 but ultimately maintained its value and closed the year up 1.19% at $3.84\/lb, say Wong and White.<\/p>\n \u201cDespite economic challenges, copper demonstrated remarkable resilience compared to other commodities like lithium and nickel,\u201d they say.<\/p>\n In 2024, the robust outlook for growth in copper demand contrasts starkly with the supply side.<\/p>\n \u201cNotably, despite plans for increased production, Codelco, the largest copper miner in the world, is experiencing its lowest production levels in 25 years,\u201d the say.<\/p>\n \u201cThis predicament is exacerbated by the simultaneous global decline in ore grades, intensifying the supply challenges.\u201d<\/p>\n Increasing production disruptions also exacerbate the gap between supply-demand.<\/p>\n \u201cThese disruptions historically hovered around 5% of supply, but the ratio has risen with recent events,\u201d say Wong and White.<\/p>\n \u201cMost notable was the shutdown of a significant mine in Panama which alone accounted for 1.5% of the global copper mine supply.<\/p>\n \u201cElsewhere, operational issues have led Anglo American to curtail its copper production.\u201d<\/p>\n Collectively, these disruptions have tilted the copper market from a projected slight surplus to an impending deficit for the year 2024, they say.<\/p>\n \u201cThere is a minimal buffer in inventories that heightens the risk of a sudden price surge should buyers make large drawdowns to secure supplies,\u201d say Wong and White.<\/p>\n \u201cThe possibility of more accommodative macroeconomic policy in 2024 further fuels the outlook for copper and creates price opportunities for copper miners.<\/p>\n \u201cThere is also the potential for mergers and acquisitions in the industry as many large miners prioritize copper as a strategic metal, adding an additional layer of optimism for existing copper miners.\u201d<\/p>\n Two Paths for Energy Transition\u2019s Copper Consumption (2022-2042E). Source: BloombergNEF, \u201cTransition Metals Outlook 2023\u201d.<\/p>\n \u00a0<\/p>\n 2023 was a blockbuster year for uranium and uranium miners as the spot price gained 88.54% to end the year at $91.09\/lb.<\/p>\n The long-term fundamentals are bullish, and price momentum is likely to continue into 2024, say Wong and White.<\/p>\n Sentiment around nuclear energy \u2014 reliable baseload power to offset the intermittent nature of renewables \u2013 is bullish, with 22 countries pledging to triple nuclear capacity by 2050.<\/p>\n Add to this increasing geopolitical instability, and Western uranium miners may be the ultimate beneficiaries.<\/p>\n \u201cIn 2024 we expect utilities to continue to self-sanction and refrain from signing new contracts with Russian entities, perhaps accompanied by government legislation,\u201d say Wong and White.<\/p>\n \u201cThe 2023 coup in Niger and Kazakhstan\u2019s chronic inability to meet production guidance add to the uncertainty and underscore the importance of supply security.\u201d<\/p>\n With uranium mine supply persistently below the needs of the world\u2019s uranium reactors, the market has relied on secondary supplies.<\/p>\n \u201cHowever, we believe that the era of inventory destocking, the primary source of secondary supplies, is over,\u201d say Wong and White.<\/p>\n \u201cWe expect an industry shift from underfeeding to overfeeding will move enrichment processes from creating additional supplies of uranium to instead creating additional demand.<\/p>\n \u201cThe uranium market is forecast to face a growing supply-demand deficit that could ultimately benefit uranium and uranium miners.\u201d<\/p>\n Source: Cameco. Data as of December 2023. The Federal Reserve\u2019s aggressive tightening in 2023 and subsequent high real interest rates\/strong U.S. dollar was supposed to have a negative impact in the gold price.<\/p>\n And yet it made an all-time high, driven by aggressive buying from central banks and sovereigns.<\/p>\n In 2024, a less hawkish Fed stance could bolster gold prices and\u00a0\u2014\u00a0in anticipation of this shift\u00a0\u2014\u00a0prompt further short covering and new long CFTC and ETF positions in gold, say Wong and White.<\/p>\n \u201cThe official sector\u2019s gold buying trends since Q2 2022 underscore the strength of demand,\u201d they say.<\/p>\n \u201cCentral bank quarterly purchases have averaged 328 tonnes over the past five quarters, a 2.6-times increase from the prior decade\u2019s quarterly average of 127 tonnes per quarter.<\/p>\n \u201cEfforts by many countries (for example, China) to move away from U.S. dollar-based reserve assets will only strengthen as deglobalization and geopolitical stresses increase.\u201d<\/p>\n Wong and White expect the confluence of central bank policies, Treasury liquidity impairment, inflationary pressures, and geopolitical factors to have positive effects on gold prices in 2024.<\/p>\n \u201cCentral bank buying and investor hedging against potential policy shifts and economic uncertainties are likely to drive robust demand, highlighting gold\u2019s enduring appeal and strategic importance in a turbulent economic landscape.\u201d<\/p>\n \u00a0<\/p>\n Could this be silver\u2019s breakout year?<\/p>\n Silver, which plays a dual role as investment vehicle and industrial metal, was held range bound by several significant factors in 2023, say Wong and White.<\/p>\n \u201cInvestment demand slowed in anticipation of rising interest rates and slower economic growth, notably in the U.S. and China,\u201d they say.<\/p>\n \u201cHigh carry costs and elevated lease rates prompted the release of silver into the physical market, further loosening conditions.\u201d<\/p>\n The outlook for silver is more promising. A Fed pivot in monetary policy is expected around mid-2024 and could lead to more supportive market flows for silver. Silver may also likely benefit as the economy \u2014 and particularly the industrial sector \u2014 recovers.<\/p>\n \u201cWe expect silver prices to improve, driven by lower interest rates, more robust physical investment, ETF purchases and increased industrial demand,\u201d say Wong and White.<\/p>\n \u201cWith higher volatility than gold, silver has the potential to outperform during the rally phase as it plays catch-up to gold\u2019s price moves.<\/p>\n \u201cTechnical patterns in the silver market also suggest the potential for an explosive move higher.\u201d<\/p>\n Silver\u2019s Bullish Flag Pattern. Source: Bloomberg. Silver bullion spot price, U.S. dollar\/oz. Data as of 1\/5\/2024. The post Here are Sprott\u2019s 2024 predictions for uranium, copper, gold and silver<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"COPPER: \u2018Risk of a sudden price surge\u2019<\/h2>\n
URANIUM: Growing deficit to benefit miners<\/h2>\n
\n\u00a0<\/p>\nGOLD: Less hawkish Fed could bolster prices<\/h2>\n
SILVER: \u2018Potential for an explosive move higher\u2019<\/h2>\n
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