Investors take Profits on Base Metals

Base metals dropped today on the London Metal Exchange, as investors took profits, with the majority of the commodity markets participating in a sell-off.

A number of metals ended up at close to the record range before cutting back later in the session.

“Supply disruptions made the fundamentals for some metals (gold, platinum, aluminium and zinc) look much better, which combined with the poor equity, property market and corporate paper market, convinced funds to go into commodities,” said BNP Paribas analyst David Thurtell.

Tin reached a new high before dropping again, reaching $19,375 a ton before fears on what Indonesia's response in battling against illegal tin mining would affect the metal. It ended the day at $19,050, an increase of $100 over what it closed at yesterday.

With most of the world's tin exports coming out of Indonesia, MF Global analyst Edward Meir said, “Tin's fundamentals look solid to us.

“The bulk of the world's tin exports come from Indonesia, and so the complex has a good chunk of its eggs in only one basket.”

Most dealers believe the sell-off was long overdue, and a correction was needed. They also said that this will be a short-term event, and prices should continue on an upward climb. Even so, with many turning to commodities as an inflation hedge, some are starting to think some metals are reaching a potential bubble, and will have to be watched carefully.

Most say we can't overly react and read into the cutback, as metals overall should be strong for some time.

Some metals shedding some of their weight were nickel, which dropped by $405, to finish at $32,845; aluminum decreased by $23, to end at $3115 a ton; lead fell by $70 to come in at $3365 a ton; and zinc declined by $45 to finish the session at $2780.