LIVINGSTONE MARUFU
Even though the price of other metals’ commodities has weakened internationally, the price of gold has been steadily rising, Business Times can report.
The world’s economies are still confronting a number of challenges, such as low commodity prices, geopolitical tensions, and an unprecedented tightening of global monetary policy in response to decades-high levels of inflation. In such circumstances, investors purchase gold as a safe haven against economic difficulties or to preserve their wealth.
On the international market, gold prices have reached US$65 467 per kilogramme against an average of around US$61 000 per kg in December 2023.
With global economic growth expected to go further down to 2.9% from 3%, Finance, Economic Development and Investment Promotion minister Professor Mthuli Ncube advised investors to invest in bullion following its resilience to economic headwinds.
“Whatever you do, just invest in gold, don’t think. Gold prices are expected to remain firm in 2024,” Professor Ncube recently said.
“The mining sector faces risks related to declining mineral commodity prices, particularly for PGMs which have the potential of scaling down ongoing expansion projects in the medium to long term.”
In his 2024 Budget Presentation, Professor Ncube said the base metal price index surged in the second and third quarter of 2022, before retreating due to slowing down global economic growth, with prices expected to fall by 5.5% on average in 2022, and decreasing by a further 12% in 2023.
He said metals and minerals prices, which briefly increased in January 2023, are expected to fall by 11.8% in 2023, relative to 2022 and a further 4.8% in 2024.
“The decrease is a result of the anticipated weak global demand in manufacturing and China’s recovery which is expected to be heavily services-oriented,” he said.
The Treasury chief said strong supply growth is projected over the forecast horizon, supported by a recovery from production outages and new mines coming on stream for key metals (copper, nickel, and zinc).
“On the contrary, precious metals prices are expected to increase by 1.2% in 2023 and a further 5% in 2024, as safe haven demand rises amid elevated global risks, with respect to future growth prospects, ongoing concerns about inflation, and financial stress in the first quarter,” Prof Ncube said.
The Chamber of Mines of Zimbabwe CEO, Isaac Kwesu, last week told Business Times that base metals have heavily suffered from weak international commodity prices.
“Majority of metals prices have seriously gone down and the revenue base has equally come down at a time when the cost of doing business has not matched or consummated.
“So this is not only unique to the lithium sector, but the whole mining sector besides gold, is facing depressed commodity prices,” Kwesu said.
Kwesu hoped that the lower commodity price cycle will normalise in the next 12 months and everything will come back to normalcy rather than the current trend.
Prof Ncube said declining international commodity prices and monetary policy tightening have dampened headline inflation during 2023.
“Nearly three-quarters of economies are expected to see lower headline inflation in 2023.
“The pace of disinflation is especially pronounced for advanced economies that have stronger monetary policy frameworks, which facilitate disinflation, as well as their lower exposure to shocks to commodity prices and volatile exchange rates,” the Treasury boss said.
He said the international commodity prices have declined from their record levels of 2022 but remain well above their pre-pandemic (2015-2019) average.
“In the outlook period, commodity prices are expected to remain broadly unchanged over the remainder of 2023 and into 2024, amid improved supply prospects and weakening global demand,” Prof Ncube said.
Despite the decline in commodities’ prices, Prof Ncube projects the mining sector is expected to grow by 7.6% in 2024, driven mainly by ongoing investment in PGMs, gold, coal and lithium.
He said the growth will also be sustained by expected relatively stable electricity supply on account of increased domestic electricity production, complemented by direct import initiatives by large scale miners and private sector investment initiatives in renewable energy, especially solar.
