Producers of Raw Materials Benefit from Federal Reserve’s Optimism

by Warren Seah

The recent remarks of Federal Reserve Chairman, Jerome Powell, have sparked optimism among producers of metals and other raw materials. Powell acknowledged that inflation rates have remained manageable without causing significant disruptions in the labor market. This news prompted cyclical sectors to rally, particularly after the release of the Fed’s “dot plot,” which revealed that most committee members were anticipating three rate cuts in 2024.

Additionally, the latest data on US wholesale prices further supports the notion of gradually easing inflation. In November, wholesale prices remained unchanged, which was even lower than the 0.1% increase predicted by economists. The report indicates that not only has cheaper gasoline contributed to this benign inflationary environment, but prices in other major categories have also been relatively subdued.

Despite these positive indicators, experts at brokerage Citi caution that miners of platinum metals may encounter declining demand in the years ahead. The transition of the automotive industry towards battery-electric vehicles could lead to a significant drop in demand for these resources.

In conclusion, while there are promising signs of a “soft landing” for the US economy, certain sectors, such as platinum metal miners, may face challenges due to evolving industry trends.

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