It seems the world's markets have been at a standstill in recent weeks, unsure of how to proceed until the Obama administration and congress are able to find a resolution to the current debt standoff. Yet, unlike financial markets, which seem to be more conscious of the global economy's precarious situation, many metal prices remain near historically high levels.
Copper is trading around US$ 9,700 per tonne, close to its historical peak of just over $10,000. Tin is selling for above US$ 27,000 per tonne, well above its five- and 10-year average, and the price of aluminum is close to one of its highest points since the financial crisis three years ago. Many minor metals, which I deal more directly with on a day-to-day basis, are near 10-year highs, and most are at their highest points since the financial crisis. So why aren't the metal markets worried about the current global economic situation? Are metal traders unfazed by the financial issues in the US, the sovereign debt problems plaguing the EU or the inability of China to resolve its own inflationary pressures?
I strongly believe that it is, in fact, exactly because of these issues that metal prices remain high. The global financial woes have all led to one thing: disillusionment with fiat currencies (read: paper money). Considering the prevalent threat of depreciation that looms over the Dollar and the Euro, it appears that many are choosing to hold their capital in hard currency, metals, that is. This extra demand has been keeping metal prices higher than what they may otherwise be in such an uncertain economic climate. Another interesting factor is that the demand may not be so much a factor of investors pushing money into the shiny commodities, but companies who see metals as a more reliable store of wealth than cash. And, while the traditional safe-haven for individual investors - gold - continues to rally, metal prices will likely continue to be boosted by the lack of confidence in the world's major currencies.
Comments