Two factors dragged metal prices down this month. First, the Chinese government recently played down expectations of further stimulus while fighting speculation by increasing margins and fees for trading. Second, the U.S. dollar strengthened amid new expectations that the Federal Reserve might be more aggressive than expected in raising interest rates.
Most analysts and miners are still quite bearish on metals markets as overcapacity hasn’t really been solved. Usually market bottoms happen when everyone is bearish, so these negative expectations are not necessarily bad.
After metals rallied during the first four months of the year, many of them took a hit in May. So far this seems like a normal reaction as prices zigzag and we don’t see enough evidence to turn bearish yet.
However, if markets have actually bottomed, prices should find support after May’s correction. We’ll have to wait and see if metals are able to bounce back up after this bear attack. Here are some charts showing some metals losing ground in May:
Silver declined 9% from it’s April high while gold prices fell 6%.
Tin prices took a hit after an spectacular run in Q1. Prices fell 9% from April’s high as Indonesian tin exports recovered in April, with exports up 36% compared to April 2015.
Other metals also lost some ground. Aluminum, nickel, lead and copper all fell 9%.
What This Means For Metal Buyers
So is this rally already over? We think it’s too early to call for that. So far this looks like it could be just a short-term correction before metals continue going up. We’ll have to wait and see if base metals are able to find support after these declines. As always, these two factors will likely determine the trend of metal prices for the rest of the year.