The past year has seen tumultuous volatility in metals prices and mining stocks; but what can we expect in the weeks and months to come? The scenario is horrendously difficult to predict, but we can expect precious and industrial metals to perform rather differently given the former—or at least silver and gold—have a monetary and investment element in their price movements while the latter (and one has to include the platinum group metals in the industrial sector here) are ultimately price dependent on the state of industrial supply and demand—and even predicting where this will lead us in the months ahead is well nigh impossible given the current global economic picture and the uncertainties surrounding consumer confidence in the year ahead.
Gold has been one of the best performers in the general market crash seen in the past nine months. The recent heavily reported surge in demand for physical gold stems from the current climate, wherein wealth preservation is the primary aim of most people—not necessarily wealth growth (though in a deflationary scenario, which some anticipate, these can amount to much the same thing). There is obviously the possibility of good gains as well, but this should be seen as a bonus if it should happen, rather than a likelihood. But the consensus is that even if the gold price does fall back, the downside potential is much more limited than that for the stock market as a whole.
Silver is a bit of a different animal, but does tend to ride on gold's coat tails – but in a far more volatile manner given its production patterns and industrial usage. Unlike gold, silver fell back 57% from peak to trough and will likely continue to be far more volatile than gold in the months ahead. Price movements remain very much tied to gold and it is in the performance of the latter where sliver's potential for price increase, or decrease, really lies.
Then there are the in-between metals—platinum and palladium—the former having suffered one of the biggest falls of all during the past year. For the moment platinum seems to be stuck at a level marginally above or below the gold price and this could well continue for a few more months, depending on where gold goes from here. Palladium seems to be in a different position. Supply was in surplus prior to the auto industry nosedive and the price looks as though it remains vulnerable with little upside potential on the fundamentals front. Unless there are curtailments in the supply position, palladium's short term does not look promising. Longer term it looks better as it continues to erode away platinum's usage in autocatalysts, but this is a slow process.
Overall, the precious metals sector has probably seen the worst of the downturn, and has weathered it better than most others. Upside potential may still be limited though in the months ahead failing any significant metals price movements. Investors should probably avoid operators in politically risky environments and those in a precarious financial situation. For those mining companies with access to funding there are most certainly still good opportunities out there for acquiring interests in good deposits at low prices.