Gold has captured most of the attention in the metals space this year and rightfully so as the yellow metal is one of 2016’s best-performing asset classes. However, some industrial metals have shown signs of life as well, indicating commodities investors may want to further examine exchange traded products such as the PowerShares DB Base Metals (NYSEArca: DBB).
The $100.7 million DBB follows the DBIQ Optimum Yield Industrial Metals Index Excess Return, a rules-based benchmark that delivers futures-based exposure to highly liquid industrial metals, such as aluminum, zinc and copper.
Copper’s resurgence has some commodities market observers exercising caution on the red metal. While production cuts may support prices now, the bounce in the copper market may be short lived as fundamental factors remain weak. Copper represents a third of DBB’s lineup.
Despite falling prices, which have pushed as much as a tenth of the world’s copper miners into the negative, the drop has not been severe enough to trigger supply cuts, Reuters reports. [ETF Chart of the Day: Copper Call]
China, the world’s second largest economy, has been grappling with weaker growth, raising concerns over its ability to maintain previous levels of demand for raw materials, like copper.[related_stories]
Looking at DBB’s chart “you can see that the price broke beyond the resistance of a key descending trendline in February, and the subsequent retest (shown by the blue circle) suggests that the momentum is in favor of the bulls. Many active traders will also want to pay attention to the recent pullback toward another critical level of short-term support near $12 because it is offering a risk-reward ratio that hasn’t been possible for several months. Traders will likely hold a bullish outlook on base metals until several of the key technical indicators suggest that it is time to sell,” according to Investopedia.
Aluminum and zinc each account for a third of DBB’s portfolio as well. DBB is down 19.1% over the past year, but up nearly 4% year-to-date.
PowerShares DB Base Metals
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.