Industrial metals posted gains in the third quarter, with silver up sharply and copper touching its highest prices in over two years, suggesting that the worst of the coronavirus hit to the economy may be over.
The third quarter economic backdrop was “very supportive of the overall commodity complex,” including industrial metals, says John Caruso , senior asset manager at RJO Futures. “The ‘reflation’ trade, assisted by the reopening of the economy and record [Federal Reserve] and government stimulus, helped the metals complex gain plenty of fervor” following the second quarter Covid-19-related shutdown and economic collapse.
“Optimism around the reopening of the global economy, a continued rally in risk-on assets, improving global economic data, and the hopes of additional stimulus helped propel the upward movement in industrial metals,” says Ed Egilinsky, managing director, head of alternatives at Direxion. The recent moves in the metals “certainly support a narrative that the worst of the economic slowdown exacerbated by Covid-19 might be behind us.”
At the same time, however, news of President Donald Trump’s Covid-19 diagnosis on Oct. 2 also “adds to the narrative of the ongoing global susceptibility to this virus,” he says. There has already been a reemergence of cases in parts of the world that can “lead to a global slowdown and a ‘risk off’ sentiment,” adversely impacting industrial metals.
Silver’s quarterly performance was impressive, especially when compared to a more modest 5.3% rise in gold futures for the same period.
Silver “benefitted from both the industrial and investment side of its demand equation” during the quarter, says Maria Smirnova, senior portfolio manager