When we put together our review of commodity markets a year ago, there were scant signs of hope. Our prediction that 2016 would be a good 12 months for gold and silver proved prescient, although it was the rattled nerves of global markets rather than a balancing of fundamentals that sent investors flocking back into the safe-haven metals. But even that rally - which went into reverse following the US election - was surpassed by the broader rebound across natural resources.
For the big miners, the year got off to a torrid start, with the share prices of debt-laden Glencore (GLEN) and Anglo American (AAL) hovering perilously close to the abyss. But since then commodities have been one of the best places for an investor to be. And just as with the sharp declines in previous years, the rally was largely unexpected: from coal to iron ore to copper and oil, most commentators had predicted further commodity price deflation and more pain for the industry. Throughout the year, the consensus has been blindsided by three key factors: costs, supply and China.
How low can costs go?