The price volatility in metal prices has noticeably increased over the past two decades. According to the World Bank’s Metals and Minerals Price Index, as of Nov 2020, the index had increased by 17 percent year-to-date to near 90.28. This increase has been to a large extent supported by the strong industrial demand from China.
The Entrenchment of the Global Supply Chain
The last quarter of the 20th century saw China being at the center of the global supply chain, with raw materials and natural resources all sourced from emerging markets and assembled/manufactured in China. Assembled products are then subsequently exported to end-consumers in other countries around the world.
China’s role in the global supply chain has not changed much over the last decade. China’s swift recovery from the pandemic has seen export growth remained strong. Multinational companies are therefore more dependent on China for cost-effective supplies and inputs.
Despite the tension between the US and China, threatening global trade and resulting in protectionist government policies, the global economy is still purchasing goods from China. According to IMF’s chief economist, China’s export growth will likely remain positive from 2020 to 2025.
Iron Ore Prices and Metal Prices to Remain Elevated on the back of Chinese Demand
The Chinese economy has continued to thrive with its robust infrastructure plan, keeping steel production up, and driving demand for iron ore. The demand has boosted iron ore prices to near US$172.35 a tonne, up more than 50 percent year to date. The recovery from the pandemic may continue to see upward price pressure for other base metals.
How Can Retail Traders Benefit from the Rising Metal Prices
Despite the retail traders’ inaccessibility to futures contracts – cash-settled exchange-traded derivative products, retail traders can trade Metal CFDs as an alternative. ZERO Markets is a good example of a CFD provider that offers precious metals CFDs products, such as gold and silver against the US dollar. CFD trading offers real-time pricing, deep liquidity, and the ability to capitalize on both rising and falling markets.
Key events this week:
- RBNZ Policy Decision, Japan Core Machine Orders (Wednesday)
- Australia Employment Data (Thursday)
- China 1Q GDP (Friday)
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