Commodities Turn Bullish Just Like Industrial Metals

November ended with a general cool-down for the base metals complex, contrary to commodities, which increased sharply. MetalMiner expected the industrial metals price pullback since the uptrend started earlier for base metals than for commodities. In bullish rallies, prices usually pull back to recover from prior gains.

Source: MetalMiner analysis of StockCharts

Despite the slight downtrend for industrial metals, the uptrend appears sustainable. Rising commodity prices and a weaker dollar both help to support the bullish sentiment.
For the second month in a row, commodities breached previous levels. When commodities move above previous peaks, the index shows signs of strength.
Source: MetalMiner analysis of StockCharts

The CRB index has now climbed close to its starting value for 2017. If the CRB index breaches the 196 level, the bullish trend could continue. Increasing oil prices drove the jump in commodities this month, together with raw material price increases such as iron ore.

What about the U.S. dollar?

This month, however, the U.S. dollar decreased sharply. In October, some analysts intimated that the U.S. dollar may have reversed its longer term downtrend. However, this month the U.S. dollar has shown weakness, and it seems that the downtrend appears set to continue.

Source: MetalMiner analysis of StockCharts

As a reminder, a weaker U.S. dollar makes it cheaper to purchase dollar-denominated commodities.

What This Means for Industrial Buyers

MetalMiner remains more bearish on the U.S. dollar and bullish for both commodities and base metals. Contrary to base metals, steel prices increases appear modest. Purchasing organizations will want to stay diligent for buying opportunities.
Base metal buyers should therefore understand how to adapt buying strategies to reduce price risk. Buying dips and purchase opportunities are highlighted in the MetalMiner Monthly Outlook report, giving buying organizations and opportunity to lower average costs and reduce risk. It is important to identify the exact moment to buy, which is reflected in our Monthly Outlook.

Leave a Reply

Your email address will not be published. Required fields are marked *

Scroll to Top