News

Metals & Mining Fourth Quarter 2022 Review and Outlook

Natural Resources
0 min read

Monday, January 03, 2023

Mark Reichman, Senior Research Analyst, Natural Resources, Noble Capital Markets, Inc.

Refer to the bottom of the report for important disclosures

Mining companies outperform the broader market. During the fourth quarter, mining companies (as measured by the XME) appreciated 17.2% compared to a gain of 7.1% for the S&P 500 index. The VanEck Vectors Gold Miners (GDX) and Junior Gold Miners (GDXJ) ETFs were up 18.8% and 21.0%, respectively. Gold, silver, copper, and lead futures prices gained 9.2%, 26.3%, 12.3%, and 6.1%, respectively, while zinc declined 1.1%. For the full year 2022, all indices outperformed the S&P 500 which declined 19.4%. Despite aggressive rate hikes by the Federal Reserve and U.S. dollar strength, gold performed as a store of value with the price ending just under where it began the year.

Will precious metals break out to the upside? The U.S. Dollar Index declined 7.7% during the fourth quarter, while the yield on the 10-year treasury note increased from 3.80% to 3.88%. While the Federal Reserve has signaled higher rates, an inflection point may have been reached as investors sought to preserve value amid deteriorating economic conditions, geopolitical uncertainty and market volatility. In our view, interest rates could peak by mid-year with the potential for easing depending on economic conditions. We think precious metals prices around current levels are sufficient for mining companies to be profitable and attract new investment. Our outlook is for range-bound pricing around current levels with a modest upward bias in the first half of 2023.

Less certain near-term outlook for industrial metals. While the price of copper declined 13.2% in 2022, the price rebounded in the fourth quarter. On a full year basis, zinc and lead prices were down 6.1% and up 1.2%, respectively. While the long-term investment case for owning industrial metals mining companies remains favorable, it may be too early to offer a bullish call due to near-term concerns about economic growth in the U.S. and abroad.

Putting it all together. In our view, precious metals mining companies, notably exploration companies, continue to offer attractive return potential. Should gold and silver prices hold recent gains, investors may begin to invest more confidently and aggressively. While the near-term outlook for industrial metals could be negatively impacted by near-term macroeconomic factors, an eventual return to economic growth could result in strong prices due to potential supply and demand imbalances.


GENERAL DISCLAIMERS

All statements or opinions contained herein that include the words “we”, “us”, or “our” are solely the responsibility of Noble Capital Markets, Inc.(“Noble”) and do not necessarily reflect statements or opinions expressed by any person or party affiliated with the company mentioned in this report. Any opinions expressed herein are subject to change without notice. All information provided herein is based on public and non-public information believed to be accurate and reliable, but is not necessarily complete and cannot be guaranteed. No judgment is hereby expressed or should be implied as to the suitability of any security described herein for any specific investor or any specific investment portfolio. The decision to undertake any investment regarding the security mentioned herein should be made by each reader of this publication based on its own appraisal of the implications and risks of such decision.

This publication is intended for information purposes only and shall not constitute an offer to buy/sell or the solicitation of an offer to buy/sell any security mentioned in this report, nor shall there be any sale of the security herein in any state or domicile in which said offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or domicile. This publication and all information, comments, statements or opinions contained or expressed herein are applicable only as of the date of this publication and subject to change without prior notice. Past performance is not indicative of future results. Noble accepts no liability for loss arising from the use of the material in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Noble. This report is not to be relied upon as a substitute for the exercising of independent judgement. Noble may have published, and may in the future publish, other research reports that are inconsistent with, and reach different conclusions from, the information provided in this report. Noble is under no obligation to bring to the attention of any recipient of this report, any past or future reports. Investors should only consider this report as single factor in making an investment decision.

IMPORTANT DISCLOSURES

This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or discussed to another party, without the written consent of Noble Capital Markets, Inc. (“Noble”). Noble seeks to update its research as appropriate, but may be unable to do so based upon various regulatory constraints. Research reports are not published at regular intervals; publication times and dates are based upon the analyst’s judgement. Noble professionals including traders, salespeople and investment bankers may provide written or oral market commentary, or discuss trading strategies to Noble clients and the Noble proprietary trading desk that reflect opinions that are contrary to the opinions expressed in this research report.
The majority of companies that Noble follows are emerging growth companies. Securities in these companies involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Noble research reports may not be suitable for some investors and as such, investors must take extra care and make their own determination of the appropriateness of an investment based upon risk tolerance, investment objectives and financial status.

Company Specific Disclosures

The following disclosures relate to relationships between Noble and the company (the “Company”) covered by the Noble Research Division and referred to in this research report.
Noble is not a market maker in any of the companies mentioned in this report. Noble intends to seek compensation for investment banking services and non-investment banking services (securities and non-securities related) with any or all of the companies mentioned in this report within the next 3 months

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

WARNING

This report is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is appropriate for any recipient particular investment objectives, financial situation or particular needs. Prior to making any investment decision, recipients should assess, or seek advice from their advisors, on whether any relevant part of this report is appropriate to their individual circumstances. If a recipient was referred to Noble Capital Markets, Inc. by an investment advisor, that advisor may receive a benefit in respect of
transactions effected on the recipients behalf, details of which will be available on request in regard to a transaction that involves a personalized securities recommendation. Additional risks associated with the security mentioned in this report that might impede achievement of the target can be found in its initial report issued by Noble Capital Markets, Inc.. This report may not be reproduced, distributed or published for any purpose unless authorized by Noble Capital Markets, Inc..

RESEARCH ANALYST CERTIFICATION

Independence Of View
All views expressed in this report accurately reflect my personal views about the subject securities or issuers.

Receipt of Compensation
No part of my compensation was, is, or will be directly or indirectly related to any specific recommendations or views expressed in the public
appearance and/or research report.

Ownership and Material Conflicts of Interest
Neither I nor anybody in my household has a financial interest in the securities of the subject company or any other company mentioned in this report.

Comments

0
No comments yet...
Share

Inbox Intel from Channelchek.

Informed investors make more money. And it’s all about timing. Get it when it happens.

By clicking submit you are agreeing to the Terms of Use and Privacy Policy
© 2018-2023 Noble Financial Group, Inc. All Rights Reserved. Channelchek is provided at no cost to be used for information purposes only and not as investment advisement.