If you can store it, buy it - the case for base metals

Industrial metals have seen significant gains since the beginning of the year. This is in marked contrast to other commodities especially grains and softs which have shown mixed performance.

What makes this a focus of interest is the fact that metals usually closely follows the global business cycle and the talk has been about a slow recovery. The price action suggests something else.

The bottom in the copper market was in December 2008. Since that time we have been moving at a steady pace upwards. The peak came in the Spring of last year similar to the stock market. Lead, zinc, and nickel all had their lows in December. The silver market bottomed in November and has also been on an uspswing. Gold hit low in November and is just below old highs from early2008. The only exception has been aluminum which has started to move upwards but at a slower pace.

The percent return for base metals since the beginning of the year:

Lead 77.70%
Copper 76.38%
Nickel 41.27%
Zinc 36.34%
Silver 23.73%

In a new era of cheap funding, it makes perfect sense to stockpile metals. Carry costs are extremely low. There also is no spoilage. Price are well below previous highs. There is no problem with management or corporate actions. You get to hold it in your warehouses if you want.

You have to assume that the price of money will decline faster then the price of these metals. So if you are China or another country with high dollar reserves it makes sense to diversify into metals for that rainy day.