Why Metals ETFs Are Showing Strength, Again

 |  Includes: DBB, JJC, XME
by: Tom Lydon

After fits and starts, global metals prices and metals ETFs are once again on the rise and stepping out from underneath oil’s long shadow.

The price of base metals like copper and aluminum are rising, emerging from under a shadow that oil has long cast. Will Smale for BBC News reports that a growing number of metal mining companies have slipped into the FTSE 100 index of leading U.K. shares, many possessing names that are not English. What’s going on?

  • China’s insatiable appetite for raw materials has sent prices upward
  • A general global economic recovery, lending support to metals prices
  • A softening dollar; if the dollar remains weak, it will mean commodities priced in greenbacks will be cheaper for overseas buyers

Look out for potential minefields, though. A big one weighing on the minds of investors is the debt situation in Greece. Fears over the outcome could lead to some pricing volatility.

Allen Syorka for The Wall Street Journal reports that a weaker U.S. dollar and an increase in London Metal Exchange canceled warrants pushed copper to two-week highs today. Warrants are documents of title for a specified lot of metal in a specific location. When those warrants are canceled, it generally means it’s been earmarked for delivery. In other words, there’s more physical demand.

  • iPath Dow Jones UBS Copper Tr Sub-Index ETN (NYSEArca: JJC)

  • SPDR S&P Metals & Mining (NYSEArca: XME)

  • PowerShares DB Base Metals (NYSEArca: DBB)