Base Metals Slammed
Jul 7th, 2009 | By Doug Casey | Category: Gold MarketThe base metals were all well into the red on Monday. Copper had a completely U-shaped day, with the bottom near the New York open, and finished at $2.2302, down 4½ cents from Thursday.
Nickel followed a similar but less steep path, closing at $7.4382/lb., down nearly 23½ cents. Zinc was similar, just retreating from its intraday highs to end at $0.6904/lb., down short of a penny. Aluminum had a strong late-day rally but it wasn’t enough as it shed more than three-quarters of a cent, to $0.718/lb., while lead also sagged, dropping almost a half-cent, to $0.7582/lb.
Copper led the industrial metals lower yesterday amid economic worries and inventory gains, but rose sharply off of session lows when chart-based buying hit key technical trading levels.
For the first time in weeks, stockpiles showed gains on two consecutive days. Inventories monitored by the LME added 900 metric tons yesterday, to 269,175 tons. That followed a much larger jump of 4,050 tons on Friday.
On the other side of the world, Chinese stocks followed suit, with inventories monitored by the Shanghai Futures Exchange rising 7% last week, to 59,980 tons, from 56,088 tons a week earlier.
The double whammy of those rising stockpiles “and the stronger dollar is having a negative impact on prices,” said Donald Selkin, of National Securities Corp. in New York. “People are getting nervous about the outlook for copper.”
And recently, there has been a “change in sentiment, with the gradual realization that unemployment levels are rising and that this recession is going to run longer,” said Alex Heath, of RBC Capital Markets in London.
Concerning aluminum, anecdotal evidence suggests that at least 50% to 75% of the metal is held in LME warehouses under longer-term contracts, which brings lower rents for metal buyers, a Merrill Lynch report said.
“These volumes are not available to markets participants at arms lengths and this is one factor suggesting that aluminium prices may temporarily spike higher when demand starts to improve through 2H09,” the report said, but added that fundamentals for aluminum remain poor.
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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.