Industrial metals: Noticeable, but perhaps only short-lived correction
by David Fleschen
Metal prices fell noticeably yesterday: The LME industrial metals index fell by 1.6%. By far the biggest loser was nickel, which fell by almost 4% to a good USD 15,000 per ton. Copper was down 2% and fell below USD 6,600 per tonne. One reason for this was the strong US dollar, which initially continued to appreciate, thus blowing the wind against the metals. Although the dollar later gave up almost all its gains, the metals remained at their lower levels.
On the other hand, weak stock markets weighed on metal prices: The S&P 500 and the Nasdaq Composite both recorded their largest daily losses since mid-June. It is now being discussed whether the strong rise was previously exaggerated and whether the correction yesterday was the beginning of a trend reversal. In recent months, however, both stock markets and metal prices have always recovered quickly from declines. Since at least nickel and copper are not falling any further today and are recovering slightly, yesterday's correction could turn out to be short-lived this time as well. After all, the mood on the financial markets was euphoric to the end, almost exuberant. However, this also carries the danger of profit-taking and thus a significant correction should the pendulum swing in the other direction. This is because the rise in metal prices was in many cases also driven by speculation. It was also technically driven, which meant that nickel and zinc were overbought.
Source: Commerzbank Research, Photo: Fotolia