Industrial and Precious Metals Take Different Paths

During 2021, precious metals including gold, silver and platinum have underperformed, while industrial metals with the likes of aluminum, tin, copper and nickel have had one of their best years since 2009. Both sectors were analyzed and compared by Golden Brokers.

Base or industrial metals refer to the metals used in the manufacturing, construction, and technology sectors.

In 2021, industrial metals posted their largest gains, predominantly driven by aluminum and tin. The main reasoning behind the gains would be the tight supply and surging demand for industrial metals, as economies around the world exhibited strong recovery from the COVID-19 pandemic.

Limited supply is expected to keep industrial metal prices high, especially in the short term, given that the demand remains intact. Yet, with the spread of the Omicron variant of the coronavirus, demand may be volatile as economies tend to be shaken up with rising cases.

Precious Metals

The most popular precious metals include gold, silver and platinum. They are used for inflation protection and portfolio diversification for investors & traders for decades, before they were used as the basis for money.

During 2021, the performance of precious metals was underwhelming to say the least. Gold underwent volatile months, fueled by investor & trader reactions to meetings from the U.S. Federal Reserve regarding monetary policy and interest rate hikes. Today, investors remain cautious as the Fed may begin hiking interest rates as early as March, which typically pushes the dollar upwards and the safe haven downwards amid increased investor appetite.

Amid rising inflation and increased macroeconomic uncertainty caused by expectations of faster interest rate hikes, a stronger greenback & inflationary pressures can be foreseen.

Increased consumer confidence might exert more downward pressure on gold for 2022. However, silver may move inversely to gold as it’s used in the production of an array of goods across multiple industries, amid recovering economies.

Muhammad Zulbahri Mohd Rajdi

Chief analyst
Golden Brokers

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