More Optimism For Metals

The Wall Street Journal has webbed an optimistic year-end report for the metals, which says the '09 rallies should continue: "Metals Have the Mettle to Rally On." It makes the sometimes-unnoticed point that '09 was a bonanza year primarily for the industrial metals. Gold did rally in the 25% range, but copper shot up 139%. Even aluminum's rise handily beat gold's.


This pattern is characteristic of reflation more than straight inflation. The industrial metals benefitted twofold, from inflation and recovery. I should add that the industrial metals [fain that I call them the "industrials"] shot up from extraordinarily depressed levels, which gold didn't reach. Copper, to take a single example, was down about two-thirds from its '08 highs. It has yet to regain those highs, and won't until it climbs above US$4/pound.



The reason why gold "stole the limelight" from all of them was that gold made record highs in '09. The others didn't.

To put it not-so-delicately, a more-than-double on copper could only have been captured by someone buying in when that precipitous decline turned into a holding pattern. It took a fair bit of courage to go into the gold market at that time, even though gold's drop was a pale shadow of copper's...