The mining commodity super-cycle finally fizzled out in 2015, after a seemingly endless run of rising Chinese demand and prices. Oversupply became the norm. Miners hastened to sell assets, slash debt, reduce operating costs and take painful write-downs, sending earnings well into negative territory. The first weeks of 2016 were even more painful; many stocks reached historic lows amid dire predictions that prevailing conditions would extend well beyond 2016. But before the end of January, gold unexpectedly took the lead, edging initially above US$1,100/oz., then easing briefly before closing at US$1,251/oz. last Friday. The gold price upswing foreshadowed copper, zinc and iron ore price increases, among others. Many miners also saw huge stock price gains, some doubling, albeit from rock bottom prices. The question now is: are the gains sustainable? Goldman Sachs one of the most influential banks in commodity markets, poured cold water on the growing belief prices have "bottomed out," and warned the current rally is "not sustainable." They also warn against betting on a sustained recovery and are particularly bearish on copper and aluminum. “Overall we find that the likelihood of a sustained improvement in Chinese demand during 2016-17 is low, and we remain strongly of the view that the structural bear market has contributed to metals declining 20 per cent over the past year and 50 per cent over the past five years remain intact,” they conclude. At Toronto’s PDAC last week – the largest mining show on earth – analysts from the world’s top market intelligence firms were also talking commodities. Dundee Capital Markets’ Martin Murenbeeld said he expected gold to end 2016 around the US$1,234/oz. mark. Gold is up about 20% year to date, thanks to safe haven buying. Gold peaked at over US$1,800/oz. in mid 2011, entered 2016 at around US$1,050/oz. but on Friday closed at US$1,251/oz. Wood Mackenzie analyst Paul Benjamin said that slowing Chinese growth would not prevent the world’s largest copper user from using substantial quantities, and prices could therefore see a slow recovery after 2016, in the ‘new normal’ of slower global economic growth. He said new mine supplies would be required from 2020 onwards. Copper fell from US$4.50/lb. in early 2011 to below US$2.00/lb. in mid January 2016 but recovered steadily closing at US$2.24/lb. on Friday CRU consultant Philip Macoun said the zinc market did not improve in 2015, given a market inventory overhang of about two million tonnes. A modest 2015 market supply deficit is expected to widen in 2016, driving prices up “very soon”. Zinc in late 2007 peaked over US$2.00/lb. then flirted with US$0.65/lb. at the end of the first week of January. before closing at US$0.82/lb. on Friday Wood Mackenzie analyst Andrew Mitchell said 2015 demand for nickel fell from 2014, and price outlook was even poorer for 2016, given lacklustre demand. However, he expects a long-term structural shortage from 2021. New projects would require an incentive price of between US$9.50/lb. and US$10/lb. Nickel peaked at US$23.57/lb. in 2007, touching US$3.43 in early February 2016. On Friday it closed at US$3.96/lb. Elsewhere on Monday, iron ore prices surged nearly 20%, to US$62.60/t CFR Tianjin, the biggest one-day gain on record. "We expect the current rally to be short-lived in the absence of a material increase in Chinese steel demand, and steel raw materials will once again drive steel prices rather than the other way around," Goldman said in a report, also on Monday. Goldman has kept its iron ore price forecast for 2016 at US$38/t and US$35/t for the next two years. Iron ore peaked at over US$180/t in early 2011, touching US$38/t in December 2015, then surging to US$62.60 last Friday, but moderating somewhat since. (Written by Peter Jones, Executive Vice President, Century Global Commodities Corporation)