Metals Inventory Squeeze Eases

Gold rebounds after recent volatility

Gold rose 1.4% to US$4,501/oz, recovering from a major -4.7% drop in the previous week, with volatility also in the other precious metals, with the pullback likely partly because the extended rally has driven increasingly speculative bets in the sector.

Most major metals see inventory increases over H2/25

The inventories at the LME of copper, aluminum, zinc and tin have all rebounded over H2/25, after severe depletions from mid-2024 through to mid-2025, while nickel and cobalt inventories remain relatively high on substantial global oversupply.

Gold stocks surge ahead of equities on metal price gain

The gold stocks recovered with the GDX up 8.0% and GDXJ rising 7.7% after -6.1% and -6.9% drops the previous week, significantly outperforming the moderate equities gains with S&P 500 up 1.1% and Nasdaq and Russell 2000 rising 0.8%.

Metals Inventory Squeeze Eases

The gold price rose 1.4% to US$4,501/oz recovering from a -4.7% dip in the previous week, but still below the recent highs of US$4,529/oz. This came as US employment numbers were slightly under expectations, the country’s trade deficit continued to contract and European inflation for December 2025 declined to 2.0%, inline with central bank’s target. The easing US employment and declining EU inflation would overall appear to provide room for their respective central banks to consider further rate cuts this year. The rising metal price saw the gold stocks jump, with the GDX up 8.0% and GDXJ adding 7.7%, after -6.1% and -6.9% slumps in the previous week. This far outpaced overall equities, which started with year with moderate gains, with the S&P 500 up 1.1% and both the Nasdaq and Russell 2000 rising 0.8%.

The US ADP private payrolls came in at 41k for December 2025 and non-farm payrolls were 50k in December 2025, up from a –29k decline and 56k rise, respectively, in November 2025. There were both moderately below consensus estimates of 48k for the ADP payrolls and 73k for the non-farm payrolls. The unemployment rate declined considerably to 4.4% in December 2025 from 4.6% in November 2025, which had been the highest level since 2021. While US employment has gradually weakened over the past year, it is still relatively strong overall, although the decline does give the Fed some additional rationale for some further rates cuts this year.

The US trade balance has improved significantly, actually nearing a balance as of the latest reported October 2025 figures, with the trade deficit at just US$-29bn. This is up from recent lows of US$-136bn in March 2025, and less than half the average monthly deficit of US$-73bn from January 2024 to October 2024 (Figure 4). This has come from the major new tariffs implemented last year by the US government, which has encouraged a substitution away from imports towards domestic goods. The tariffs have so far not generated the spike in inflation that had been widely expected.

Rising metals price volatility over past month

In addition to the gold volatility over the past two weeks, the other precious metals saw major drops in the last week of 2025 followed by a major rebound last week. Silver, platinum and palladium are up 38.7%, 38.1% and 25.0% in just a month, and while this is partly fundamentally driven, there also appears to be a rising speculative element to the moves, which could make pullbacks more likely (Figure 5). Both the silver and platinum markets faced significant supply deficits in 2025 and these could persist into 2026, and palladium’s gains have been more muted likely because its market is expected to be near balanced for 2025. The rise in all four precious metals also has likely been driven substantially by monetary factors, with the markets increasingly looking to hedge expected fiat currency debasement with hard money.

Aluminum, copper market deficits expected for 2026E

While the inventories of many of major base metals saw substantial declines from the middle of 2024 well into H1/25, several have seen a considerable recovery in stocks held at the LME over H2/25. This build-up in inventories may indicate that the pace of global economic expansion has started to moderate. Aluminum inventories on the LME peaked at 1,127k tonnes in May 2024, and then declined consistently through to low of 338k tonnes in June 2025, but had risen to 509k tonnes as of December 2025 (Figures 6, 7). The trend for copper inventories was similar, with a slightly later peak at 323k in August 2024, a plunge over the next year to lows of 91k, also in June 2025, and a substantial recovery to 145k by the end of last year. Both these metals are broad proxies for the global economy, and appear to indicate that demand was robust especially from around mid-2024 through to mid-2025.

However, for copper specifically the rebound in LME inventories has been partly been from the depletion of stocks in China. While this is similar to the situation with silver, it has been a broader trend over most of the entire past year, rather than one than that really only became extreme in the past few months. The shift in copper inventory balances started as early as February 2025, when the US initially announced that it would consider copper tariffs. This led US buyers to increase purchases substantially in anticipation of potential tariffs and saw the share of CME copper inventories surge.

Historically the UK’s LME has the largest copper inventories, with US and China stocks smaller and at similar levels. However, the proportion of copper stocks on the CME consistently increased in 2025, even after the US announced at the end of August 2025 that tariffs would only be applied to a relatively small proportion of total copper imports. While this completely reversed a huge gap in the CME versus LME copper prices, it did not drive a substantial reduction in the inventories held in the US, with markets apparently still concerned about potential tariff increases.

There is still a substantial market deficit for both the aluminum and copper markets forecast by Australia’s Office of the Chief Economist for both 2026E, which is expected to continue in 2027E for the former, but with a substantial surplus expected for the latter (Figures 8, 9). This is likely partly on expectations of the Grasberg mine in Indonesia, the world’s second largest copper mine, returning to full production, after a shutdown of part of its operations after a major mudslide in September 2025.

This could see a potential outperformance of the aluminum price versus copper towards the second half of 2026, if actual demand and supply appear to be close to these forecasts. There are also risks of a shortfall in demand if the tech boom, especially from the AI sector, starts to slow, as it has been a major source of demand for copper and aluminum, and there have been some signs already that the recent growth of this sector may not sustainable.

Iron ore inventories in China rising

The LME does not report iron ore inventories, as China is the major global center for the metal and accounts for the majority of global demand for use in its steel industry. China’s portside inventories of iron ore jumped in Q4/25 to 159mn tonnes, having trended down from a peak of 151mn tonnes in Q3/24 to a trough of 139mn tonnes in Q2/25. This has been roughly similar to the trends for several other base metals, again indicating a slowdown in demand in H2/25. China’s steel production growth turned negative yoy in May 2024, and has continued to trend down, with the AOCE forecasting a market surplus from 2025E to 2027E (Figures 10, 11). This has been driven by expectations of continued weakness in China’s property and infrastructure sector, which are the largest drivers of global steel, and therefore iron ore, demand.

Nickel oversupply persists, zinc inventories rebound

The LME nickel inventories have trended up consistently over the past year and a half, in contrast to the other major metals where stocks were depleted significantly from mid-2024 to mid-2025 (Figure 12). The market remains heavily oversupplied after a huge increase in capacity expansion for the metal in Indonesia, which has become by far the world’s largest nickel producer over the past decade. This was driven especially by investment from China, which in turn requires nickel for use in steel production, after Indonesia banned unprocessed nickel exports.

This led to huge investment in nickel processing capacity in the country by China, and with the slowdown in the steel industry in the country, has resulted in extreme nickel oversupply. A several year slump in the nickel price followed, below the operating cost per tonne of many international producers, forcing them to halt production. The exit of many global players in additions to Indonesia’s major restrictions on new nickel production capacity appears to have finally started to drive a recovery in price over the past month. While the AOCE still estimates a major surplus for the nickel market in 2026E and 2027E, it is expected to be substantially below the 2025E peak (Figure 13).

The LME inventories for zinc have followed a pattern more similar to copper and aluminum than nickel, even though it is also mainly driven by its use in steel production. While stocks of the metal peaked much later, at 279k tonnes in December 2024, they also saw a huge decline in H1/25 to a trough of 34k tonnes, and a H2/25 recovery to 108k tonnes as of December 2025 (Figure 14). The AOCE forecasts the market to be balanced in 2025, but then a surplus in 2026E and 20267E, partly driven by the expectation of a continued slowdown in global steel production (Figure 15).

Inventories flat for lead, for tin surge and decline for cobalt

The LME inventories for lead have been relatively flat overall since mid-2024, and did not follow the pattern of a decline through to H1/25 and rebound in H2/25 of many of the other metals (Figure 16). While tin inventories did follow the same pattern as these other metals, its rebound in Q4/25 was particularly extreme, seeing it reach far above previous highs (Figure 17). The LME cobalt inventories consistently rose from mid- 2024 through to a peak of 140k in June and July 2025, but have declined in H2/25 to 123k (Figure 18). While similar to nickel, there is a considerable oversupply of cobalt, the decline in LME inventories has partly been driven by shifting storage to other countries in contrast to strong demand or a major reduction in supply.

Producers all see strong gains, most TSXV gold rises

The major producers all saw major gains, and most of TSXV large gold rose (Figures 19, 20). For the TSXV gold companies operating mainly domestically, there were no major updates, and for the TSXV gold companies operating mainly internationally Robex reported its merger with PDI was approved by shareholders, Asante closed its private placements, Mako announced drill results from El Golfo and Rusoro filed its opening appeal brief with the US Court (Figure 21).