Staying cautiously positive on metals

Industrial metals prices fell in September on the back of the appreciation in the US dollar and fears that the re-tightening of virus containment measures in Europe and elsewhere will dampen demand growth. However, we think that infrastructure-intensive fiscal spending in China will boost metals demand and prices over the next year, although the risks to our forecasts are probably now more to the downside. Precious metals prices also declined. That said, we expect US real yields to fall in the coming months, as the Fed adopts average inflation targeting, and that prices will recoup some of their losses.