And the winner is . . . tin, by a wide margin.
It's interesting to see how current market prices compare to the year ago period, and it becomes even more fascinating when we compress numbers into monthly average prices, to see how the current year through June compares to the full year 2020.
Attached is a summary of charts for base and precious metals, comparing this year’s monthly average prices to last year, along with the full year 2020, and 2021 year to date annual average prices.
Interestingly, the one thing that all markets have in common, is that 2021 monthly average prices are all higher than the year ago month, and at this point, the 2021 year to date average through June is higher than the full year 2020 averages.
On a year-over-year basis, tin is the star performer, with a 65% increase, followed by copper at +48%.
On a year-over-year basis, tin is the star performer with a 65% increase, followed by copper +48%; aluminum +32%, with silver, nickel and zinc up between 25% & 28%, lead +14%, and gold coming in last with a 2% gain.
Further, with the exception of gold, every other market has seen 2021 post the highest monthly averages over the past eighteen months. But at the risk of repetition, past performance is no guarantee of future results.
It’s also notable that within base metals, all markets posted their low watermark during March of last year, except for lead, which found its low point in May.
There are a number of different ways to interpret these charts. First one can say we are just recovering from the severe downturn during the first quarter of last year, which might fit with the way the Fed is looking at things.
Another view is that inflation is showing up in many markets to include base metals. This becomes even more obvious when we look at year over year changes on the statistics page. Copper is up 51% from last July; tin +94%; hot rolled steel +242%, and crude oil +84%. Big numbers, one and all.
Gold, however, is virtually unchanged from last year, as it is up just $12, or 0.7%. From this perspective, if gold is our guide to inflation, then inflation isn’t a serious threat right now. Of course, we all know this can change in a flash, but this is what the market is saying today.
Copper is up 51% from last July; tin +94%; hot rolled steel +242%, and crude oil +84%. Big numbers, one and all.
Another potential explanation for higher prices lies in the low level of mining investments over the past several years, as prices for most metals were trending lower after hitting their highs in 2011. Also, a quick glance at the base metals charts shows inventories well below their highs over the past five years, which from a very macro point of view would coincide with higher prices.
As for the markets last week, crude oil ran into resistance at $75, coinciding with the highs during 2018; yields on the 2 & 10 year fell again, as did the spread between them, and equities continue rising with the S&P 500 scoring new record highs. And last but not least, the almighty dollar eased a bit, with the ICE U.S. Dollar Index vacillating right around 92. And where it goes from here will give us some clues on the direction of other markets.