Low Base Metal Prices Predicted in Recessionary Environment
Oct 1st, 2008 | By Doug Casey | Category: Financial News, Gold MarketThe base metals were mixed on Tuesday. Copper fell below $2.80 in the pre-dawn hours, but then righted itself, managing to claw its way back into positive territory at $2.9036/lb., up better than a penny and a half. Nickel dropped below $7 early, rallied back into the mid-morning, but then sagged again to close at $6.9642/lb., down more than 24 cents.
Zinc had some ups and downs but finished where it started, at $0.7444/lb., unchanged. Aluminum had a couple of huge pre-dawn spikes, but came off both of them to end at $1.082/lb., up a penny, while lead had a good day for a change, adding 3 cents, to $0.8261/lb.
Copper logged its worst quarter since at least 1989, falling 26%, and its drop to $2.765 marked its low point since March of 2007, but the rally up from there could suggest that the bottom feeders are beginning to snack at these levels.
The third quarter meltdown comes on the heels of a strong first half of 2008 that saw copper gain 28%, with a record peak of $4.26/lb. on May 5. September was a particularly cruel month, with the metal shedding 15%, the largest monthly decline since June 1996.
Outside of nickel, the big Monday selloff abated as traders waited to see if anything would come of the pledge, by both the administration and Congressional leaders, to continue negotiating the bailout package.
But demand concerns are not going away, and many analysts are pessimistic even in this beaten-down market.
“Copper prices are likely to adjust lower amid shaky financial conditions and expectations that slower global growth will greatly reduce demand for industrial metals,” said David Rinehimer, of Citi Futures Perspective in New York.
Ron Goodis, of Equidex Brokerage Group in Closter, New Jersey, chipped in with: “Everything for copper is pointing down right now … Sentiment in this market has really swung around. We saw a great performance earlier, and now it’s made a huge run down. Copper has really shown that there is no support left for it in this market.”
And on the supply side, Chile, which provides about a third of the world’s copper, reported that its production of the red metal in August was down 1.2% from the same month in 2007.
Source: Base metals mixed - Lower prices predicted in recessionary environment.
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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.