Copper hit a three-year high of $6,970 per tonne on the London Metal Exchange (LME) on Tuesday morning.
Aluminium is faring even better, trading above $2,100 per tonne for the first time since 2013.
Zinc eclipses both. At a current $3,200 per tonne it is traversing chart levels last seen during the great bull run of 2007-2008.
The whole base metals complex seems to be on an upwards charge. The LME index of metals has jumped by 20 percent over the last three months.
A previous pattern of price divergence between individual metals is dissolving. Among the major base metals traded on the LME, only tiny tin is declining to join the bull party.
Simple market mechanics, the forced covering of short positions on both futures and options, explain some of the ferocity of the recent moves.
A weaker dollar is acting as an accelerant to the bull flames, although its impact should not be overstated. Looking at copper specifically, analysts at Goldman Sachs argue that the dollar effect can account for only “a fraction” of the recent rally (“Copper: fundamentals and technicals point to different directions”, Sept. 5, 2017).
Speculative money is definitely in the mix, fund positioning flexing higher across the spectrum.
But this largely unexpected metals rally is also pointing to a shift in market narrative from the specific to the general in terms of demand and supply.
