The key to a new metal price cycle is a positive growth surprise

John Robertson


The key to a new metal price cycle is a positive growth surprise. Unexpectedly strong growth would boost sentiment but also help to soak up inventories and, where necessary, reduce excess capacity by catching producers off-guard. If producers are correctly anticipating the growth outlook and matching market needs, there is no reason for any cyclical adjustment. One indicator of the potential for surprise is the direction of IMF global growth revisions. The IMF has had to wind back its forecasts over the past four years. Forecast increases would normally imply better than currently expected outcomes. The IMF head has foreshadowed another downgrade in coming weeks: ...on balance, global activity is strengthening - but could be weaker than we had expected..., she said last week. This is the wrong direction.

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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...


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