Could commodities suffer from the Trump effect?

Image: www.newyorker.com

Trump heading closer to presidency has seen a rally in metal and oil prices, further strengthened by the strong US dollar.

However, this has generated scepticism about the markets and whether China’s rally will begin to fade out.

Robin Bhar, base metals strategist at Societe Generale said, “When you have copper going up by $US1000 in barely a week you know there is something wrong. Fundamentals don’t change that fast,” according to the SMH.

Copper prices shot up by 25 per cent to $US5445 a tonne within one month, with nickel, zinc, and lead also experiencing rises.

Iron ore in particular received a boost, rising 40 per cent, and nearly doubling since the start of the year.

Investors are betting that Trump’s new regulations will “gobble up commodities” – with his ambitious plans on building bridges, roads and telecommunications infrastructure. However, infrastructure spending is not pegged until 2017-18.

China, which is going along the same strain as Trump’s new infrastructure-led economic growth plan, accounts for nearly half of the world’s base metal consumption.

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