LONDON, Jan 11, 2017 – This time last year the base metals complex was all doom and gloom. The London Metal Exchange (LME) index of prices touched 2,049 in January 2016, its lowest reading since the dark days of January 2009, when the world seemed to be spiralling into full-blown depression.
China came to the rescue then and it came to the rescue again last year, Beijing policymakers once again pumping money down the twin metals-intensive channels of infrastructure and construction to reinvigorate economic growth. The LME index has since recovered to 2,768. True, performance has been mixed, largely reflecting each individual metal’s supply dynamics.
But the worst seems to be over for base metals prices, with more upside to come. That, at least, is what fund managers are betting on. There was some marginal reduction in fund positions over the course of December but the money men appear to be largely keeping the faith with the broader turnaround story.
EVERYONE LOVES DR COPPER AGAIN
Copper has long been the hedge funds’ favourite base metal to the point that somewhere in the mists of time someone awarded it an honorary doctorate for what it can supposedly say about the state of global manufacturing.
Five years of falling prices, however, saw “Dr Copper” fall out of favour. All that changed in November last year, when the copper price broke up out of its previous trading range in spectacular style.
Fund money poured into the market, feeding on and accelerating the upwards momentum.
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