Several European pension funds anticipate the price of precious and industrial metals to increase in the next year, according to a research study carried out by NTree International Ltd.
Out of the 150 European pension funds researched – which have combined assets under management worth $213bn (€174.9bn) – 85% expect the price of gold to increase over the next 12 months as jewellery consumption rebounds fully in line with the global economic recovery.
The research also revealed that two thirds of pension funds surveyed also expect the price of platinum to increase and 60% expect the price of silver to increase for the same reason.
Pension funds are also optimistic about industrial metals, with 77% expecting an increase in the demand and price of palladium, nickel and copper over the next two years, it found.
According to NTree, this will be driven by major economies led by China which are expected to see strong growth in 2021 and 2022 and major increases in industrial production.
Hamad Ebrahim, the firm’s head of research, said: “Our research highlights the post pandemic economic recovery is having a positive impact on precious and industrial metal performance. Metals are particularly appealing to pension funds looking to diversify their portfolios and as a hedge against inflation.
He added that metals such as palladium, copper and nickel are vital for the transition to a sustainable and greener economy, which further increases their appeal.
Another recent study by NTree researching 50 UK pension funds with a combined $76bn in AUM showed that the asset owners are looking to increase their allocation to precious and industrial metals.
But it seems this trend is Europe-wide. The pension fund for the canton of Vaud (CPEV), for instance, has dropped investments in hedge funds and commodities, replacing the latter with physical gold. The move is part of a review to its strategic asset allocation drawn up last year.
The Dutch pension fund for specialty chemicals firm DSM has made a 5% investment in physical gold because of its diversification benefits, it said.
Green tech to power commodity prices
Oxford Analytica, an international consulting firm, claimed commodity prices are surging, reflecting not only the recovery from 2020’s slump but also rising demand from construction, zero-carbon transport and renewable energy technologies.
It said copper demand is expected to surge, reflecting its importance to electricity networks, electric vehicles and wind and solar power. Investment in new supply is expected to lag, it added.
Moreover, supply is concentrated, leaving it vulnerable to disruption. “Aluminium could substitute for copper in some usage cases,” the firm said in a statement.