COLUMN- Industrial metals bull party on hold; will restart shortly – by Andy Home (Reuters U.K. – January 18, 2018)

LONDON, Jan 18 (Reuters) – After the party must come the hangover. Industrial metals went on something of a bull bender over the course of December and have done no more than stagger into the New Year.

Copper went on an 11-day binge of consecutive highs as London Metal Exchange (LME) three-month metal powered through the $7,000 a tonne barrier to a four-year peak of $7,312.50 on Dec. 28. It’s now back below $7,100, with another New Year just around the corner.

The Chinese Year of the Dog starts on Feb. 16 and the onshore Chinese markets are chilling the bull party even further with long liquidation across the metallic board. But the analyst consensus is that this is no more than a pause in the two-year, 60 percent rally in the LME index of core contracts.

There is more to come and the party is still open to newcomers. “It pays to be late and enter commodity markets as the business cycle matures,” according to Goldman Sachs. (“Commodity Watch: It pays to be late”, Dec. 11, 2017)

The bank maintains its recommendation of being overweight commodities on a 12-month basis, citing “strong global demand across the commodity complex” and “a positive carry in key commodity markets”, which means “backwardation” to those of us not running investment portfolios. So what makes them and the other many bulls so confident?

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