Base metal prices remain strong while gold slumps

With prospects for the second half of 1990 clouded by economic recession, few mining analysts are calling for a spectacular new bull market to emerge this year. According to analysts of the London-based Metals & Minerals Research Services, “1990 is witnessing a mild recession, with the auto industry and parts of the construction sector partly depressed.”

In its international review of market trends, MMRS says base metal consumption is expected to register no overall growth this year, putting it at the bottom range of metal price forecasters.

The MMRS forecasters are skeptical about the prospect for any upward move in precious metal prices either, because the damaging combination of low inflationary expectations and high interest rates remains in place.

There is also cold comfort in MMRS’s projection of renewed strength in the U.S. dollar over the coming months, and gold remains vulnerable to any fresh Middle Eastern selling which has been responsible for its recent weakness.

MMRS anticipates that the third quarter of this year will prove to be the bottom of the economic cycle, after which, however, growth will accelerate. The first two quarters of 1990 saw base and precious metal prices move in opposite directions. While base metal prices managed a modest recovery in the second quarter, the precious sector bull market came to an end.

“Mining base metals has remained a more attractive proposition” the analysts say, “but the question is whether this will continue to be the case in 1991.”

Individual base metal price forecasts by MMRS are reported as follows: Price Forecasts, annual averages 1988 1989 1990 1991 Gold (US$/oz) 437 381 360 365 Silver (US$/oz) 6.54 5.50 5.00 5.15 Platinum (US$/oz) 531 510 475 475 Copper (US$/lb) 1.18 1.29 1.10 0.85 Nickel (US$/lb) 6.26 6.04 3.35 3.50 Lead (US cents/lb) 30 30 37 33 Zinc (US cents/lb) 56 77 75 60