Base Metals Surge
May 4th, 2009 | By Doug Casey | Category: Gold MarketThe base metals were all flashing green on Friday. Copper moved higher in the pre-dawn hours, went flat until late morning, then shot up again to finish barely off its intraday highs at $2.0954/lb., up 7¼ cents.
Nickel crashed from the late pre-dawn hours to late morning, but then moved up sharply to regain positive territory and close at $5.3093/lb., up 5½ cents. Zinc was up steadily all day, ending at $0.6705/lb., up 4½ cents. Aluminum had a good day, adding a penny and a third, to $0.6762/lb., while lead was strong as well, tacking on just under 3 cents, to $0.6271/lb.
Copper led the industrial metals higher, prolonging its recent strong run to a 2-week high as the somewhat upbeat economic numbers combined with continually dwindling supplies to give the metal a shot in the arm.
Inventories monitored by the LME were off sharply again yesterday, falling by 7,075 metric tons, to drop below the 400,000 mark for the first time since January 21 and end at 398,700 tons. Since late February, stocks have shed some 140,000 tons, about 25%.
In addition, inventories held in Singapore and South Korea were the lowest since 2005, showing that “Chinese buying has been particularly strong this first quarter,” said Leon Westgate, of Standard Bank Group in London.
“To me, it all suggests that the stars are starting to align for a global recovery,” said Bart Melek, of BMO Nesbitt Burns in Toronto. “We certainly look like we are bottoming,” he added, projecting the U.S. economy to experience positive growth by as early as the third quarter.
Jesper Dannesboe, senior commodities strategist Société Générale, noted particularly that, “The ISM data that came out was much better than expected, especially the new orders component, strongest since August 2008 … The manufacturing data gave the market a real boost in the afternoon.”
Amid the euphoria, a damp towel was thrown by Daniel Brebner, head of commodity research at UBS AG (NYSE:USB) in London, who said that, “China has been the only buyer really in the copper market.”
Brebner predicted that, “You are going to see less demand from China in the second quarter,” and said that copper is likely to fall 20% over the next three to four months.
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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.