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The resource prophets of doom have been enjoying a heyday (or several weeks) calling the end to all things good. Those bears will be sent packing in the coming year.
Lets assume we can use copper as the benchmark for metals generally – a reasonable assumption!
So let’s look at a chart for NYMEX High grade copper:
Chart 1 – High Grade Copper Weekly Line Chart
click chart for more detailYou can see it has risen from an incredibly low level and whilst it is pausing right now, the big picture is up. If you are long on copper, you may regard the current price action as much more than an easing, as its heavy hand has been seen in very soft mining prices world-wide. The price could fall further, although it is likely to find support around these levels.
Copper is almost a modernisation standard. As per capita income climbs in developing countries, the clamour for western basics such as running water (pipes), electricity (wire), air conditioning (condenser tubes) ramps up. Copper has many desirable attributes such as being an effective electrical and thermal conductor; it is corrosion resistant, antibacterial, easily handled and so the list goes on. As you can imagine, there are billions of people in the world who lack such basics as running water and electricity who desire these services – let alone air conditioning and automobiles.
The continued rise of copper and other metals is not a trumped up hedge fund story. There is substance to it. So this and other metals may soften further, but demand will ultimately rise again and become insatiable once more and ridiculous prices will ensue.
Enjoy the ride
Tom Scollon
Chief Analyst
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