A lot has changed in the commodity space over the past 12 months. For starters the London Metal Exchange (LME) index of prices fell to 2,049 during January 2016, but it’s since recovered strongly to 2,799 (graphic 1). This appears to reflect a very significant situation – the worst seems to be over for base metals prices, with more upside ahead. Fund managers are playing a major role in all of this, as it is their growing positioning in metals that has had a major role in the overall price recovery. Copper is a good example, as after five years of declining prices, the metal broke up out of its previous trading range during November 2016, due to an eight-fold increase in net fund long positioning on both the LME and the COMEX. Using the January 2016 trough in the LME price index as a reference point, fund net long positioning has more than doubled in the case of lead and nickel, tripled in the case of aluminium and increased five-fold for zinc (graphic 2).


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