Base Metals: Staring down the bears - TDS

Analysts at TDS are initiating a long position in copper, zinc and lead.

Key Quotes

“Rationale

The recent reversal in USD weakness combined with the inflation repricing, which drove risk-off sentiment, thereby precipitating an equity market reversal, and seeing base metal prices correct from recent highs. However, given synchronous global growth, growing physical deficits resulting from chronic underinvestment and still historically low rates, we expect copper, zinc and lead to move up to fundamentally determined levels over the coming months.”

“Positioning

Given the current risk-off trend, we expect that money managers have recently reduced some of their frothy length across base metals and took profits. As markets re-calibrate, we see further opportunities for asset allocations across the complex to grow given current late-cycle dynamics.”