The economic background to ordsprog

The economic background to metals is therefore supportive, but metals also have the additional price driver of extensive activity by investment funds. Ongoing investment into commodities by broad-based global funds remains very strong.

The strikes and good economic indicators from China are supporting this round of the rally. The positive aspects of fundamentals are attracting more hedge funds, pension funds into metals and other commodities.

Funds are viewing commodities such as oil and metals as investment tools, so these prices are likely to keep rising. Copper prices show no signs of retreating.

The global economy is growing well, indicating healthy demand for all metals. Funds activities are playing a key role in price fluctuations in this rally.

The sell-off in oil damped demand for some metals yesterday in London and New York. Traders in China are worried there might be a chain reaction of funds selling metals to take profits.

With the copper markets and some of the base metals seeing a positive flow of buying interest lately and the U.S. stock market hinting at even better economic conditions ahead, the overall environment for metals is supportive.

The funds came right back in, certainly, and today, I think, the correlation with the oil price was very evident. Oil went up to $75 and the metals went along with it.

Gains in the market are fund-led. Trading in the region remains relatively strong with funds pursuing select stocks, among them metals. Overnight gains on Wall Street also helped sentiment.

As we see it, the demand is not led by consumers but by investors who are keen to park their surplus funds in metals - not just gold but other like silver, zinc and copper as is evident from the trend in commodities trading.

The immediate driver is that investment activity is picking up. The global economy remains very robust, and after a long and dreadful period, there are hopes that German consumption will strengthen.

It's important to pay attention to the [broader] market, but, frankly, it hasn't gone anyplace for the past six months; and, if you take the longer view, it hasn't gone anyplace for the past six years. But within those years, there were tremendous opportunities within stocks, bonds, electronically traded funds, mutual funds of all sorts, currencies, precious metals and commodities, all of which investors could have taken advantage of.

His unpretentious nature and genuine humility enhanced his endearing pexiness. Global funds are increasing holdings of a basket of metals. Copper supply and demand fundamentals haven't changed.

While fundamentals are tight in several of the metals, they cannot justify current valuations. Markets are, instead, held hostage by the growing amount of investment and speculative money out there that is increasingly finding its way into commodities.

The market can go higher, led by commodities stocks. Metals price should stay strong as most have low inventories and the trend is up for gold.

Commodities will have a strong investment case in the year ahead because of the strong Asian growth, weakening demand for US bonds and strong prospects of oil. Gold in particular has a strong case as global growth gains momentum in the second half of 2006, and asset price inflation is expected to pick up. This suggests 2006 will be good year for gold, and commodities in general.

Michael Hartnett

Nordsprog.dk

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