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Silver, Gold Could Outperform Industrial Metals in 2022
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The Quick Take

  • Mining companies finished 2021 strongly with a 7.3% gain in Q4/21, reported Noble Capital Markets analyst Mark Reichman in a Jan. 3 research note. In comparison, the S&P 500 Index appreciated 10.6% during the quarter.
  • In Q4/21, the futures prices for gold, silver, copper and zinc were up, but lead was down.
  • In Q4/21, the U.S. Dollar Index and the 10-year treasury yield, headwinds for gold, increased.
  • In 2021, industrial metals equities outperformed precious metals equities. This trend will likely reverse in 2022, according to Noble.
  • In 2021, gold and silver prices dropped whereas copper, lead and zinc prices went up.
  • In 2021, base metals equities drove performance of the overall metals industry.
  • Owning industrial metals equities long term is still favorable.

Noble Capital Markets analyst Mark Reichman reviewed Q4/21 performance of the metals sector, highlighting that it finished the year on a strong note. He cited several supporting statistics. They include performance of the VanEck Vectors Gold Miners (GDX) and Junior Gold Miners (GDXJ) exchange-traded funds, which were up 8.7% and 9.4%, respectively, in Q4/21.

The analyst noted that the futures price for gold, silver, copper, and zinc increased 4%, 6.1%, 9.1%, and 8.5%, respectively, but for lead it decreased 2.4%.

"We believe investors may view precious metals more favorably in 2022 to protect portfolio values from potential volatility in equity markets, an uncertain path for inflation and the risk of Federal Reserve monetary policy errors."
—Noble Capital Markets analyst Mark Reichman

Looking at price trends for the full 2021 year, Reichman reported gold was down 4.5% and silver was down 12.1%, yet copper, lead, and zinc were up 26.4%, 21.3%, and 33.6%, respectively.

In his report, Reichman also relayed Noble's expectations for the metals industry this year, noting the firm remains "constructive" on it.

"Valuations, particularly among junior companies, remain attractive while current gold and silver prices are sufficient to be profitable," according to the report.

Noble expects the 2021 trend to shift and for precious metals equities to outperform industrial metals equities this year in light of certain factors.

Two are the increases in the U.S. Dollar Index and the 10-year Treasury yield, which are positive for gold. The former rose 1.7% in Q4/21 and 6.4% in 2021. The latter was up 1.51% in Q4/21.

Also, investor sentiment is likely to shift in 2022, Reichman wrote.

"We believe investors may view precious metals more favorably in 2022 to protect portfolio values from potential volatility in equity markets, an uncertain path for inflation and the risk of Federal Reserve monetary policy errors," he added.

Mergers and acquisitions activity is picking up, and related transaction premiums indicate value in the sector, wrote Reichman.

This outlook for 2022 does not mean investors should abandon their positions in industrial metal equities. Rather, they should hold them, Reichman noted, because owning them over the long term "remains favorable."

Today, the supply and demand fundamentals for industrial metals are strong, and throughout 2022, industrial metals equities are expected to generate good cash flow.

Additionally, "improving supply chains, inventory restocking, and greater capital spending could be supportive of pricing," Reichman wrote.


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ANALYST CREDENTIALS, PROFESSIONAL DESIGNATIONS, AND EXPERIENCE: Senior Equity Analyst focusing on Basic Materials & Mining. 20 years of experience in equity research. BA in Business Administration from Westminster College. MBA with a Finance concentration from the University of Missouri. MA in International Affairs from Washington University in St. Louis. Named WSJ 'Best on the Street' Analyst and Forbes/StarMine's "Best Brokerage Analyst.” FINRA licenses 7, 24, 63, 87
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NOTE: On August 20, 2018, Noble Capital Markets, Inc. changed the terminology of its ratings from "Buy" to "Outperform", from "Hold" to "Market Perform" and from "Sell" to "Underperform." The percentage relationships, as compared to current price (definitions), have remained the same. Additional information is available upon request. Any recipient of this report that wishes further information regarding the subject company or the disclosure information mentioned herein, should contact Noble Capital Markets, Inc. by mail or phone. Noble Capital Markets, Inc., 150 East Palmetto Park Rd, Suite 110, Boca Raton, FL 33432, 561-994-1191. Noble Capital Markets, Inc. is a FINRA (Financial Industry Regulatory Authority) registered broker/dealer. Noble Capital Markets, Inc. is an MSRB (Municipal Securities Rulemaking Board) registered broker/dealer. Member - SIPC (Securities Investor Protection Corporation).

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