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May 3, 2011 Dear Friend,
In the past several trading sessions
gold, silver, platinum and aluminum made all time records, 31 year highs,
and 3 year highs in the cases of platinum and aluminum. These four metals
trade in closer sympathy to rising crude oil or inversely to the weakening
dollar and low interest rates.
However, copper
at $4.166 down 5.3%, zinc at $1.007 down 4.9% last week, Nynex hot-rolled
steel at $780 down 9.1% and uranium at $55.50 down 3.1% fell to levels not
seen since December, December January and November, respectively. Each metal
trades based on its own specifics, which tend to be weakening for some basic
materials from recent high levels.
We look for lead and zinc prices to decline more with inventory surges, as each commodity trades on its own merits rather than in “group sync.” Based on the four week moving averages of lead inventories rising 12,869 tonnes and zinc inventories rising 27,265 tonnes per week, we estimate LME and Shanghai exchange lead warehouse inventories will break the 372,650 tonne May 1994 record in three weeks and zinc its 1,234,725 tonne September 1994 all-time record in within one week. Yes, lead and zinc markets are much larger 17 years later, but stockpiles are growing and are not small. Investors appear increasingly hostile towards commodities stocks, as neither the precious metals shares closely tied to booming prices nor the base metals shares are rising very much.
Faithfully,
John C. Tumazos, CFA |
Copyright © 2008 John Tumazos Very Independent Research,
LLC
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