Far East Capital Newsletter
Copper has taken the baton from gold
28 Nov 2020

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Copper has taken the baton from gold

Investors around the world are getting worked up by the prospects of a number of coronavirus vaccines that will soon be distributed globally. Expectations of an economic revival and a return to normal business activity have pushed stock markets higher while gold has been sold down heavily. Consequently, we are seeing money rotate away from gold stocks and into other commodities such as lithium and other battery input materials, rare earths, copper and iron ore. Technology and innovation stocks have also received inflows. Oil and gas stocks have been strong.

Gold and copper are travelling in opposite directions. Gold is drifting lower as gold ETFs report an exodus of funds while copper hit a 29 month high in London on Monday night. Some people are saying that copper is performing on expectations of economic recovery in the US, but others are saying that China is behind the move as it seeks greater control of the red metal. On fundamentals, there seems to be too much smelter capacity in China, but on the political front there are suggestions of more sinister motivations. 

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