A little nickel exchange traded note has quietly outperformed, with nickel prices rising to a one-year high Thursday, as diminished supply and bullish speculators help drive up this base metal.
The iPath Serues B Bloomberg Nickel Subindex Total Return ETN (NYSEArca: JJN) increased 34.8% year-to-date. In comparison, the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (NasdaqGM: PDBC), the largest U.S.-listed broad commodity ETF, gained 7.6% so far this year.
Nickel for delivery in three months on the London Metal Exchange advanced 3.5% to $14,955 per metric ton and was on pace for its highest settle since June 2018 and was set to market its 12th consecutive session of back-to-back gains, the Wall Street Journal reports.
“Nickel is continuing to fire on all cylinders,” analysts at Commerzbank wrote in a note.
The industrial metal is one of the best-performing commodities so far this year, surging 39% in the year to date.
Bolstering the nickel market, supplies have decreased on disruptions at a nickel smelter, along with floods and landslides in Indonesia, a large producer of the ore. Meanwhile, inventories at the London Metal Exchange declined to the lowest level in six years at 149,000 tons.
On the demand side, investors have raised bets that electric-vehicle adoption and battery production could increase the demand for the base metal. Analysts argued that most of the recent gains have been fueled by speculative buying on higher nickel prices.
However, TD Securities analysts warned that due to the speculative nature of the recent price moves, the rally could quickly reverse if traders exit on their positions, if sentiment shifts or if Indonesia’s mining situation stabilizes.
That “could be a catalyst for prices to correct somewhat after this impressive rally,” TD Securities analysts said.
Furthermore, higher prices could bring out additional inventories that were not tracked by exchanges, according to ING.
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