BRIGHT PROSPECTS FOR COMMODITIES DESPITE PRICE DROP

Precious metal prices were largely muted amid welcome news of a promising COVID-19 vaccine being developed by Pfizer Plc. and BioNTech SE.

Investors have piled into the gold and silver metals this year, as they are considered safe havens when monetary policies are loose. Central banks across the world have lowered interest rates to a record low to counter the damaging effects of the coronavirus.

Gold dipped 0.77% in October, and has fallen 3.35% in the past three months of the year. However, the metal remains 28.56% higher for the year.

The metal may be resetting amid pandemic expectations, a repricing of stimulus expectations by gold investors, a realignment of inflation fears, and a shift in mindset around post-US election political change.

While some of these moves may be welcomed, gold’s story is not yet over, even if there is a perceived light at the end of the tunnel.

Analysts expect central banks to maintain low interest rates. This usually means a weak US dollar, which has historically been a positive sign for commodities such as gold.

The S&P GSCI (Goldman Sachs Commodity Index), which tracks futures for 24 raw materials, declined 2.7% in October compared to the previous month, taking its year-to-date loss to nearly 22%.

However, the S&P GSCI Industrial Metals index rebounded in October, buoyed by ongoing recovery in China's economic activity, and the restart of manufacturing facilities across the world.

China’s exports maintained strong growth in September and October. In USD terms, exports were up 11.4% in October after a resurgent 9.9% in September, while imports unexpectedly surged by 13.2% year on year in September, and followed it up with 4.7% increase in October, the country’s custom agency data showed.

Overall, commodity prices launched an impressive recovery in the third quarter of 2020, after being battered by the COVID-19 pandemic in the first half of the year.

Meanwhile, non-energy prices rose 9.6% in the third quarter, with metals and minerals rising 19.5% during the period, according to the World Bank.

“Non-energy prices are projected to see a modest increase in 2020 as a small fall in metal prices is offset by an increase in agricultural prices, and see a further rise in 2021,” the World Bank said in a forecast in October. “The outlook remains exceptionally uncertain and depends on the duration and severity of the pandemic, including the risk of an intensifying second wave during the Northern Hemisphere winter and the speed at which a vaccine is developed and distributed.”

Energy prices were another big winner, rising 33.9% in the quarter, but those gains were from a low base, and crude oil remains well below USD 50 per barrel.

Saudi Arabia took another major step in quantifying its minerals and mining potential with three new significant deals.

In October, Bandar Al-Khorayef, minister of industry and mineral resources and chairman of the board of directors of the Saudi Geological Survey (SGS), signed contracts with Sander Geophysics Arabia Ltd. (SGAL), Xcalibur Airborne Geophysics Company, China Geological Survey, and a consortium of the UK's International Geoscience Services Limited (IGS) and the Geological Survey of Finland (GTK).

The contracts are part of the SGS's ambitious Regional Geological Survey Program (RGP), which is also in line with Vision 2030 initiative that aims to diversify the economy and monetise its non-oil resources wealth.

The survey will focus on mapping some 600,000 square kilometres of the mineral-rich Arabian Shield area in western Saudi Arabia over the next six years, and help attract future investors.

The USD 19 million deal with SGAL is a joint venture based in Al-Khobar and will provide airborne geophysical survey of Block 1 of the Arabian Shield.

South Africa's Xcalibur Airborne Geophysics Co. will conduct airborne geophysical survey of Blocks 2 and 3 of the Arabian Shield, for a total value of USD 26 million. In addition, China Geological Survey will provide geochemical survey throughout the entire Arabian Shield area, for a contract deal valued at USD 54 million.

The consortium of the UK's IGS and Finland’s GTK, also struck a USD 49.5 million deal with SGS to oversee the technical aspects of the RGP and ensure the quality of operation and produced data.

"The SGS also affirmed that the main goal of launching the RGP initiative is to build on the efforts exerted in geophysical and geochemical survey, and in developing geophysical maps, to produce detailed digital geological maps of the Arabian Shield area, that accurately reflect the types, locations, and quantities of mineral resources in the area," according to the Geological Survey.