Falling inflation is a risk to most metals but could benefit gold

Overview

This is Bernstein's 3Q26 update on global metals and mining, covering major commodity price forecasts, macro drivers, industry valuations, and ratings and price targets for multiple mining companies. The report's core view is that mining equities performed strongly in 1H26 but are late in the cycle, with industry EBITDA margins above long-term mid-cycle levels. Valuations have declined from their first-quarter highs but still warrant a defensive stance. Falling inflation may pressure prices for most metals, but if it leads to more dovish Federal Reserve expectations, it could benefit gold.

Core views

The report believes macro factors have again become important drivers of commodity markets. Disruptions related to the Strait of Hormuz affected aluminium, oil, thermal coal, and sulfuric acid markets, and indirectly affected nickel and iron ore; market attention subsequently shifted to U.S. interest-rate expectations. At the commodity level, copper is not an attractive current entry point, nickel is a cheap metal awaiting rebalancing, aluminium faces price pressure as the strait reopens but its recovery will be slow, gold is supported by falling inflation and the possibility of a dovish Federal Reserve, iron ore is expected to decline modestly or remain flat, and coal is supported by supply suspensions caused by accidents in China, low natural-gas inventories, and weather risks.

Analysis framework

The report combines macro interest-rate expectations, commodity supply and demand, inventory days, industry EBITDA margins, company commodity-price sensitivities, EV/EBITDA, DCF, and price-target adjustments to evaluate commodities and mining equities. At the stock level, the report updates company models using commodity-price and exchange-rate assumptions and values companies using either a combination of DCF and EV/EBITDA multiples or a single-multiple approach.

Methodology notes

• Cycle and valuationMean reversion of industry EBITDA margins

  Use industry margins relative to long-term mid-cycle levels to assess the position of the mining cycle and long-term return risks.

  The report notes that industry margins are significantly above long-term mid-cycle levels. Although they have limited predictive power over the next 12 months, they have stronger explanatory power over longer horizons, supporting a defensive allocation.

• Stock sensitivity analysisCommodity price and exchange-rate sensitivity model

  Estimate changes in EBITDA based on a company's financial sensitivity to commodity prices and exchange rates, and estimate changes in market capitalization assuming valuation multiples remain unchanged.

  This method is used to compare actual share-price performance with model-implied performance. It finds that Freeport lagged relative to the rise in copper prices, while BHP was re-rated as its copper exposure was reassessed.

• Company valuationCombined DCF and EV/EBITDA valuation

  Use a combination of DCF and forward EV/EBITDA multiples to determine price targets for multiple companies.

  For example, some companies use a 25/75 or 50/50 combination of DCF and EV/EBITDA. Target multiples are generally based on 2027E EBITDA and adjusted for commodity prices, exchange rates, and capital-expenditure risks.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Gold / Barrick / Newmont

  Falling inflation and expectations of a more dovish Federal Reserve could benefit gold and gold equities.

  Strengths

  Long-term price forecasts are above consensus, Barrick and Newmont retain Outperform ratings, and valuation multiples are relatively low.

  Weaknesses

  Gold prices were previously pressured by short-term rate uncertainty, and the report also notes that gold is relatively more bearish than peers in the short term.

  Comparison

  Compared with base metals, gold is more directly affected by real interest rates and the Federal Reserve's policy path.

  Risks

  If inflation rises again or the Federal Reserve becomes more hawkish, gold valuations and price targets could come under pressure.

• Copper / Freeport-McMoRan / Antofagasta / Rio Tinto

  Copper prices are jointly affected by U.S. tariffs, inventories, and Chinese demand.

  Strengths

  If tariffs or supply disruptions drive copper prices higher, ANTO and FCX would benefit, while RIO's Outperform rating could provide a hedge.

  Weaknesses

  The report does not consider the current level an attractive entry point for copper; inventories continue to rise and long-term price assumptions are oriented toward mean reversion.

  Comparison

  BHP was re-rated because copper accounts for more than 50% of EBITDA, while Freeport lagged as copper prices rose.

  Risks

  The outcome of U.S. refined copper tariffs, weak Chinese demand, and a slower-than-expected recovery in Grasberg production.

• Nickel / Glencore

  Nickel is viewed as a cheap metal awaiting supply-demand rebalancing driven by Indonesian discipline.

  Strengths

  Indonesian policy discipline is helping establish a floor under prices, and Glencore has relatively favorable nickel exposure among the covered companies.

  Weaknesses

  Nickel inventory days are rising, and short-term supply-demand rebalancing still requires confirmation.

  Comparison

  Compared with copper and aluminium, the report has a stronger long-term preference for nickel.

  Risks

  Changes in Indonesian production policy, HPAL cost changes, and demand recovering more slowly than expected.

• Aluminium / Rio Tinto

  The reopening of the Strait of Hormuz eases price pressure, but supply-chain recovery is slow and costly.

  Strengths

  Aluminium can serve as a substitute for copper, and RIO has significant aluminium exposure while retaining an Outperform rating.

  Weaknesses

  The report has a long-term mean-reversion view on aluminium, while the fading of short-term strait disruptions could pressure prices.

  Comparison

  Compared with copper, aluminium is supported by logistics disruptions and substitution demand, but its long-term upside is more limited.

  Risks

  Transportation normalizing faster than expected, insufficient demand, and falling costs pushing prices lower.

• Iron Ore / Rio Tinto / Vale / BHP

  Weak Chinese macro conditions and disputes with suppliers pushed iron ore prices below approximately USD 100/t; the report expects only a modest subsequent decline.

  Strengths

  RIO, VALE, and BHP have the greatest leverage to relatively stable iron ore prices.

  Weaknesses

  Chinese real-estate stimulus is insufficient, and manufacturing PMI has been below 50 in most months.

  Comparison

  Compared with coal, iron ore lacks a short-term supply-accident catalyst and depends more heavily on Chinese demand.

  Risks

  Further weakening in Chinese demand, disruption from supplier negotiations, and normalization of shipping costs.

• Thermal Coal / Met Coal / Glencore

  The report has a stronger short-term preference for thermal coal and met coal.

  Strengths

  Supply suspensions caused by accidents in China, low natural-gas inventories, and potentially hot weather could become positive year-end catalysts, while Glencore has relatively high exposure.

  Weaknesses

  The thermal-coal bull-case scenario based on a prolonged closure of the Strait of Hormuz has already faded.

  Comparison

  Coal's short-term fundamentals are better than those of most base metals, but it remains subject to energy-transition and policy pressures over the long term.

  Risks

  Supply recovery, normalization of LNG logistics, cooler-than-expected temperatures, and policy restrictions on coal demand.

• China demand

  China remains the source of approximately 50% of global demand for commodities including copper and iron ore.

  Strengths

  Technological self-reliance, advanced manufacturing, AI infrastructure, new energy, and grid investment provide structural demand support.

  Weaknesses

  Low consumer confidence, weak fixed-asset investment, and cautious, localized real-estate policy.

  Comparison

  Chinese demand is shifting from property and traditional investment toward manufacturing, exports, and the grid, creating diverging patterns of commodity exposure.

  Risks

  Exports facing anti-dumping barriers, continued PMI contraction, and policy stimulus weaker than expected.

Key data

• Report date2026-07-09The report footer and report information show 9 July 2026.
• Covered ratingsOutperform: Barrick, Newmont, Rio Tinto; Market-Perform: Anglo American, Antofagasta, BHP, Boliden, Freeport-McMoRan, Glencore, ValeThe report lists the rating portfolio in the investment implications section.
• Barrick price-target adjustmentABX.CN price target lowered from CAD 91.00 to CAD 86.00; a separate Barrick-related USD price target was adjusted from USD 66.00 to USD 61.00The adjustment reflects updated commodity-price and exchange-rate assumptions, as well as risks from higher capital expenditures and delays at Reko Diq.
• Newmont price-target adjustmentNEM price target lowered from USD 157.00 to USD 147.00The valuation continues to use a 6.75x 2027E EV/EBITDA multiple.
• Rio Tinto price-target adjustmentRIO.LN price target raised from GBP 62.00 to GBP 66.00The report says it continues to use a 25/75 combination of DCF and a 6.0x 2027E EV/EBITDA multiple.
• Copper price view2026 copper price forecast of approximately USD 12,419/t and 2027 forecast of approximately USD 11,000/tThe report believes the current level is not an attractive entry point for copper and that the path of U.S. refined copper tariffs is a key variable.
• Gold price view2026 gold forecast of approximately USD 5,063/oz and 2027 forecast of approximately USD 5,500/oz, with the long-term view above consensusThe report has a stronger long-term preference for gold and believes falling inflation and a potentially dovish Federal Reserve could provide support.
• China macro2026 GDP target of 4.5%-5%; official deficit ratio of 4%; RMB 1.3tn in ultra-long special government bonds; RMB 4.4tn in special local government bonds for bank capital replenishmentThe report believes policy continuity is strong but stimulus is limited, with greater emphasis on technological self-reliance, investment, and structural tools.
• China grid investmentState Grid plans approximately RMB 4tn of investment from 2026-2030, or approximately RMB 800bn per year on averageThe report views grid investment as an important source of support for Chinese demand.
• U.S. rate expectationsNonfarm payrolls increased by +57k, below the 110-115k consensus; the implied policy rate for December 2026 declined from 3.99% to 3.93%The report believes changes in rate expectations are affecting short-term commodity markets, particularly gold and risk assets.
• Base-metal inventoriesVisible inventory days for copper, aluminium, and nickel rose from 10, 3, and 23 days to 14, 4, and 28 days, respectivelyRising inventories indicate increasing supply-demand pressure in base metals, particularly as copper inventories have continued to rise since mid-2025.
• Valuation levelsANTO declined from above 9x in the first quarter to approximately 7.7x, while AAL declined from above 8x to approximately 6.7x; gold-equity multiples remain relatively lowBase-metal equity valuations have declined from their highs, but the report still believes an overall defensive stance is warranted.

Impact & implications

For portfolios, the report favors reducing aggressive exposure to most high-valuation, high-margin metal and mining equities while retaining gold, selected coal exposures, and high-quality stocks with clear commodity leverage. Falling inflation is not unambiguously positive: it may lower costs and weigh on prices for most metals, but it may also increase the appeal of gold assets through expectations of lower interest rates. Chinese demand remains important, but insufficient stimulus for real estate and consumption makes a strong rebound in traditional metals demand difficult; technology, manufacturing, and grid investment provide relatively more certain support.

Risks

• After falling inflation lowers cash costs, it could place downward pressure on prices for most metals.
• If Federal Reserve policy does not turn dovish, the positive thesis for gold and gold equities could fail to materialize.
• Insufficient stimulus for Chinese real estate and consumption could limit improvements in traditional demand for copper, iron ore, aluminium, and other metals.
• Rising base-metal inventories, particularly continued increases in copper inventories, could pressure prices and mining-equity margins.
• Policy paths for U.S. refined copper tariffs, Indonesian RKAB quotas, and coal export controls remain uncertain.
• Industry margins are at elevated levels; if they mean-revert, long-term return risks will increase.
• At the individual-stock level, risks include higher capital expenditures, project delays, production disruptions, and contraction of valuation multiples.

What to watch

• Whether U.S. refined copper tariffs are implemented or replaced by a trade agreement.
• The impact of U.S. inflation, nonfarm payrolls, and the Federal Reserve's policy path on gold and risk assets.
• China's manufacturing PMI, exports, consumer confidence, real-estate policy, and the pace of grid-investment execution.
• Whether copper, aluminium, and nickel inventory days continue to rise or begin to decline.
• Indonesia's nickel and coal RKAB policies, coal export controls, and the recovery of coal-mine supply in China.
• The recovery of production at key copper mines such as Grasberg and changes in Freeport's production guidance.
• Whether mining-equity EV/EBITDA multiples continue to decline, particularly the valuation divergence between base-metal equities and gold equities.