LAUNCESTON, AUSTRALIA – When is a bull market not a bull market? When it is in iron ore.
The steel-making ingredient is currently on a winning streak, with Asian spot prices at 20.3 percent above the most recent low hit in December last year.
Thus iron ore sneaks into the definition of being in a bull market, having surpassed the 20 percent mark that somewhat arbitrarily designates a rally as being significant.
But looks can be very deceiving. The Dec. 11 trough of $37 a ton was actually the lowest recorded since spot assessments began in late 2008.
The close on Wednesday of $44.50 means iron ore is a mere $7.50 away from the all-time low, with the modest gains in absolute terms providing context to the more impressive percentage rise.
Still, a savvy trader who bet on a price rise after the low will have made handy profits, something increasingly difficult to do in the new paradigm of low and volatile commodity prices.
While iron ore has had a few good weeks since mid-January, it’s very unlikely that this is the start of any sustained rally, rather it’s more likely an opportunity to go short again.
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