Prices & Review

Overview (August 2026)

Base metals split into two performance groups in August. Zinc, copper, tin and precious metals were showing strength and upside potential, while nickel, lead, aluminium and the other battery metals remained largely rangebound, trading well below earlier highs.

Supply concern appears to be the main differentiator in the base metals, although aluminium’s absence from the stronger group is somewhat surprising given the ongoing situation in the Middle East, while concerns about government intervention in the bond markets, currency debasements, rising geopolitical risks and central bank dip-buying seem to have driven the rally in precious metals.

The fact gold prices have rallied strongly at a time when long-term bond yields hit highs not seen since 2007, shows investors’ confidence in fiat assets has weakened. It is no coincidence that this happened when the US debt burden hit $40 trillion, inflation is proving sticky and the US Treasury is trying to fight market forces by doubling its efforts to buy back long-term bonds.

Also, interestingly the US dollar weakened as long bond yields strengthened, highlighting another breakdown in the historical relationship. The market seems to be demanding higher bond yields because it is getting more concerned. There is a risk that these bond market concerns feed through into the equity markets, which could drag down metal prices too. Volatility in US equities did pick-up when the US Treasury made its long-bond policy announcement, but that has since died down. All eyes will now be on the central bankers’ Jackson Hole meeting.

In the absence of broad market jitters, the outlook for the metals looks constructive. Copper, zinc and tin face declining exchange stocks, mine supply tightness and potential supply disruptions. The developing El Nino weather pattern could potentially cause further supply disruptions too. Copper and tin are also benefitting from strong sentiment on the back of the ongoing electrification, datacentre and defence spending thematic. These metals could well push higher.

Nickel and lead, while capped by high levels of exchange stocks, should find themselves supported by either balanced supply/demand fundamentals in the case of lead, or by government intervention in the case of nickel. The Indonesian government is unlikely to introduce policy that will weaken the nickel price.

For the battery metals, recent producer responses have led to a pullback in prices from their earlier highs. In lithium, the restart of idle production capacity and potential for more restarts have pushed prices into consolidation mode, while the arrival of more DRC cobalt hydroxide in China, following earlier export delays, has led to some price weakness. In both cases price weakness is likely to be temporary as overall the lithium-ion battery market is growing fast through organic growth.

Overall therefore, supply side issues seem to be driving metal prices, while the demand side faces numerous headwinds. China’s growth is not what it used to be, GDP growth was 4.3 percent in the second quarter, compared with the same period in 2025, this was down from 5 percent in the first quarter. The high-tech and export sectors remain strong, but the property, consumer and retail sectors remain weak. Government stimulus measures introduced in August seem set to underpin the current situation, rather than provide a significant boost.

Even though growth has been slowing in China, it is still relatively strong compared with what the West is seeing. Euro area annual GDP growth was 1 percent in the second quarter and US GDP annualized growth was 1.5 percent in the second quarter, compared with 2.1 percent in the first quarter.

Preliminary manufacturing purchasing managers index (PMI) data for August was a bit more upbeat with readings across Japan, Europe, the UK and the US averaging 53.15, so comfortably above the 50 divide between contraction and expansion, but not showing much acceleration compared with July’s readings of 53.05.

Inflation, however, remains elevated with rising consumer prices, household costs and more expensive energy, with July’s headline annual inflation rising 2.9% in the Eurozone, 3.4 percent in the UK, while the Federal Reserve’s preferred inflation gauge, personal consumption expenditures (PCE) price index, was 3.7 percent in July.

As a result, the ten-year treasury yields remains elevated at 4.66 percent in late-August, compared with 4.47 percent in late-July. While the global economy continues to absorb high energy prices and supply chain disruptions remarkably well, there are enough potential headwinds that could still destabilise markets. Consequently, there is little room for complacency.