Base Metals Boom
Apr 16th, 2009 | By Doug Casey | Category: Financial NewsThe base metals all blasted higher on Wednesday. Copper was flat until the late pre-dawn hours, when it took off and pushed steadily higher straight through the day, finishing at its intraday high of $2.1813/lb., up 10¼ cents.
Nickel followed an almost identical path, closing at its intraday high of $5.5459/lb., up 31 2/3 cents. Zinc was a solid gainer, adding 3½ cents, to $0.6687/lb. Aluminum moved modestly higher, ending at $0.6697/lb., up just over a half-cent, while lead had a very strong day, tacking on almost 4 cents, to $0.6935/lb.
Copper failed to reach the $2.20 mark touched earlier in the week, but led the industrial metals in a broad-based rally that resulted in solid gains across the board.
The big driver of copper came from the supply side as stockpiles showed a huge drawdown. Inventories monitored by the LME declined by 11,600 metric tons yesterday, to 480,400 tons. It was the biggest fall-off since last October.
Reflecting the optimism that has gripped at least a part of the market, Michael Cuggino, CEO of Pacific Heights Asset Management, predicted that the price of copper will continue to climb as demand increases in emerging economies, especially China.
“What’s happening in copper now is a reflection of the broader global economic story,” said Cuggino. “We’re still expecting to see long-term global growth that’s going to drive demand for copper and the other commodities.”
As usual, Gijsbert Groenewegen, of Gold Arrow Capital Management in New York, was cautious, particularly given clear indications that U.S. economic growth remains stagnant.
“Copper may be able to get as high as $2.25, but after that it is going to meet resistance,” Groenewegen said. “Levels that high do not seem sustainable given the weakness that is still present in the economy.”
Meanwhile, zinc advanced for a fourth straight day, forging its highest level in six months, also on speculation that demand is increasing in China, the world’s largest producer and consumer of the metal.
“We’re getting anecdotal evidence of orders picking up in recent weeks, and this has given the bulls a reason to push prices higher,” . analyst Pang Ying said yesterday.
Pang also noted that “the widening spread between London and Shanghai prices encourages overseas purchases.”
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.