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Investors are betting billions that the Metals Bull Run won’t stop

(Bloomberg) – A year after the red-hot bull run in industrial metals that pushed copper to record highs, investors are still piling up and betting billions of dollars it won’t run out anytime soon. Wall St. is “don’t stop buying now,” with Goldman Sachs Group Inc. and Bank of America Corp. among those advising investors to charge in anticipation of a long-term rally fueled by the world’s recovery from the pandemic and spending on renewable energy and electric vehicle infrastructure. copper has already doubled to over $ 10,000 per ton in the past year, and Bank of America says $ 20,000 is possible if supply falters badly while demand rises. that languished for years, prompting more people to make investments that have long been considered unattractive. In the futures markets, investors have already heeded the call, with speculative betting in London and New York copper contracts hitting historic peaks during the dramatic rise of the red metal. Still, bulls say copper’s bright outlook could attract more investors. the thing that drives commodities to their peak is financial demand, rather than physical demand, “said Evy Hambro, global head of thematic investing at BlackRock Inc.” We are seeing a global greening of the world that will be very resource intensive, and that trend is likely to last for decades. The race to get your hands on some of the action continues to gain momentum, with record quantities being inundated by some metal-focused exchange-traded products. That’s a trend worth watching, as ETPs provide an easy route for retail investors, whose numbers have increased over the past year, and open the door to more institutional investors. Mining companies are also on the rise as they generate huge profits. Valuations for Rio Tinto Group and BHP Group are at record or near record levels, while investments in mining funds are also starting to pick up. Assets in the BlackRock World Mining Fund were up $ 3.1 billion to a six-year high of $ 7.5 billion in the six months to April. Still, the fund is well below its 2011 peak of $ 18 billion, suggesting inflows could run much further. the same spate of investment that came their way during the China-led commodities boom of the 2000. In a low-carbon world, some high-profile investors are pulling out of the extractive industries, even as miners, including BHP and Anglo American Plc, are turning away from assets like coal and oil to metals such as copper that are important for renewable energy sources. The balance of power has also shifted in the futures markets, with fleet-footed algorithmic investors taking the place of superstar hedge fund managers as the dominant force. Regulations have also caused investment banks to shut down their own trading divisions, taking some of the power out of their bold price predictions. Not to say investors haven’t accumulated. First respondents Among the investors who responded most vigorously when the copper started to revive last March was a group of technically advanced algorithmic traders known as commodities trading advisors. Dissecting masses of data, they were a driving force behind the early rise in investor optimistic positioning. Often their trading strategies are executed with little human oversight, so as money managers watched nervously as Covid-19 forced major industrial economies into lockdown, CTA-buying programs began. “The speculative community was betting on a global growth recovery,” said Max Layton, director of commodities research at Citigroup Inc. “The CTAs didn’t necessarily know why they were doing it – they just did it based on historical correlations and trends – but they just happened to make the right decision.” When breakthroughs with Covid-19 vaccines emerged, Layton said. Collectively, by the end of the year, they would help take speculative positioning in London Metal Exchange and Comex copper contracts to a new peak, with their net position accounting f or more than 10% of underlying demand, according to Citigroup ETF inflows Unlike larger precious metals markets, exchange-traded products have never gained much of a grip on copper, but that is changing rapidly. this year by $ 366 million, taking assets under management to a record $ 841 million. metal ETPs saw their largest ever inflows in April. “The deep realization that is pervading investors is that this was not just a temporary increase caused by supply disruptions,” said Mobeen Tahir, associate director for research at WisdomTree. “It is, in fact, a fundamental shift in copper demand that will drive prices going forward.” Index Influx In addition to optimism about the long-term demand outlook for copper, it is also benefiting from investor cash hunt for broad commodity price increases in recent months. Commodity index funds provide another way to invest in metals such as copper, as well as energy and agricultural products, and inflows have skyrocketed in recent months. Citigroup estimates show that assets in such funds were high at $ 230 billion in March for nearly a decade. As a basket, commodities usually do well during periods of rapid economic growth, and also tend to act as a hedge against inflation that can erode returns elsewhere. As inflation concerns heighten, further inflows into commodity index funds could add new fuel to the metal fire. Visit us for more articles like this at bloomberg.com Sign up now to stay ahead of the curve with the most trusted business news source. © 2021 Bloomberg LP

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