The rally in metals exchange traded products this year has been stoked by precious metals, namely gold and silver with some solid contributions from palladium and platinum. By comparison, industrial metals, such as copper, have been obvious laggards.
Many industrial metals and miners rallied on the belief that China would support growth through stimulus measures, augmenting demand for metals while enticing investors to jump back in. Moreover, the depreciating U.S. dollar made USD-denominated resources cheaper for foreign buyers. The ongoing global low-yield environment also pushed investors toward more attractive assets, like commodities.
However, some market observers believe demand from China simply is not strong enough to support near-term upside for copper prices.
Investors that want to position for a potential rebound in industrial metals without making a commitment to a single metal should consider the iPath Bloomberg Industrial Metals Subindex Tota Return ETN (NYSEArca: JJM).[related_stories]
JJM “has been designed by its managers to reflect returns that would be potentially available through an unleveraged investment in the futures contracts on aluminum, nickel, zinc and copper. Taking a look at the chart, you’ll notice that the bulls have recently managed to push the price above the resistance of the long-term 200-day moving average for the first time in over 1.5 years. The closes above $19.64 in July acted as a strong indication that the bulls are in control and many active traders will confirm this move by the taking note of the golden cross that occurred when the 50-day and 200-day moving averages crossed in early June,” according to Investopedia.
Industrial metals producers have been trimmed the fat, cutting production and increasing efficiency to support prices. Additionally, any further delays in a Federal Reserve rate hike would help keep pressure on the dollar and support metal prices.
Still, much of investors’ enthusiasm for industrial metals, assuming such a scenario comes to pass, will be determined by copper and the iPath Dow Jones-UBS Copper Subindex Total Return ETN (NYSEArca: JJC), an exchange traded note that tracks copper price movements.
“Industrial metals are often overlooked by those new to trading commodities, but based on the charts discussed above, the recent closes above key resistance levels suggest that a long-term uptrend is just beginning. Lucrative risk-to-reward ratios could lead to massive returns for those willing to take on the risk,” adds Investopedia.
For more information on Copper ETFs, visit our Copper category.
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.