There has never been a greater level of uncertainty, confusion and downright misinformation regarding the metals markets.
Confusion over the outlook for base metals has led many investors to simply exit the sector, pushing down the prices of many companies. While there is a lot of talk, and many headline-grabbing quotes, there is very little in the way of comprehensive research and analysis behind the opinions being thrown around.
I have participated in five metals-oriented investment conferences in the past six weeks, putting me in touch with many leading experts in this field. Opinions from those experts, in presentations and informal discussions, cover a broad range.
While there is considerable disagreement, any of those experts who have taken the time to look carefully at the situation agree on a few things:
Demand for metals is growing and is likely to continue to grow; Actual production of metals has been nearly flat, as new production is largely offset by depleted mines; Projections of metal production have consistently over-stated reality, as output falls short of expectations; Inventories of metals are practically depleted; Speculative investors (primarily hedge funds) have become important players in the metal markets, yet many of those players have only a superficial knowledge of metal market fundamentals. The confusion regarding the outlook for base metals appears to derive from a couple of points that are not well understood by many analysts.
Having spoken with many experts and considered a lot of information, I am more convinced than ever that the outlook for metals remains bullish. While metal prices may not continue to rise, they will certainly not decline a great deal for a very long time. Most importantly, the need for new mines grows ever more pressing, adding value to those companies that hold metal deposits. This situation creates an incredible buying opportunity.
ZFX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
