In a nutshell, strong demand—which is typically linked to an economy that is expanding quickly—will cause base metal prices to climb. Base metal prices typically decrease when the economy is contracting, as in a recession. Although supply issues may also be at play, they are less frequent because there aren’t many other factors than demand that have an impact on the production of base metals globally.
The manner which gold prices vary is entirely different. The demand for gold is not significantly correlated with industrial output. But inflation, inflation-related anxiety, and general future apprehension all have a significant impact. Gold has historically stood for safety, stability, and strong value. There will be additional upward pressure on gold prices as circumstances become more uncertain.
For the past few years, the price of gold has fluctuated between $1,200 and $1,400 per ounce (US Dollars). This suggests a relatively modest rate of inflation and a moderate level of fluctuating uncertainty. Since President Trump entered office, I have noticed a spike in global tensions and general fractiousness. However, I wouldn’t be hopping on the gold bandwagon until the price of gold decisively breaks $1,400/oz.
Investing in base metals is typically done through the use of futures and options on metal contracts, though you might also buy or sell the stock of producers. It is typically a trend-following game, therefore for the most certain outcomes, a distinct trend is required. Consult your charts and keep in mind that trends frequently end abruptly and forcefully and that no trend lasts forever. Base metal prices are much more likely to decline significantly than gold prices.
Base metal costs increase as the dollar declines
Industrial metal prices increased on Friday as a result of a weaker dollar and lower-than-expected inflation data from China, allaying concerns about declining demand as a result of rising prices. By 0222 GMT, three-month copper on the London Metal Exchange had increased 1.9% to $7,955 per tonne. On the Shanghai Futures Exchange, the most actively traded October copper contract increased 3.2% to $9,055.71 a tonne. As the dollar took a break from its ferocious climb, holders of other currencies could purchase metals for less money. Amid heatwaves and COVID-19 flare-ups, China’s consumer prices increased at a slower-than-anticipated rate in August, while producer inflation declined to its lowest level since February 2021, according to government data.
China’s government on Thursday unveiled new initiatives to encourage investment and support the country’s COVID-damaged economy, which further improved confidence. China is the largest consumer of metals in the world. Because of its sluggish economic growth in recent months, metal demand has decreased. Fundamentally, the limited supply of readily accessible metals supports the price of copper. On Thursday, the LME’s cash copper premium over the three-month contract reached its biggest level since November 2021, closing at $108.50 per tonne. At 102,725 tonnes, LME copper inventories are at their lowest level since April 6. Aluminum climbed 2.9% to $2,333 per tonne on the LME, while zinc increased 3.7% to $3,244 per tonne. Tin up 2.9% to 180,610 yuan a tonne, aluminum increased 2.1% to 18,810 yuan a tonne, and ShFE nickel increased 5.2% to 183,210 yuan a tonne.
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