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Metals enjoy longest rally in seven years as low rates lure cash

Aluminum, lead and silver gain more than 14% in first quarter.

Metals were one of the best investments in 2016, and that’s turning out to be true again this year.

An index of the six major metals rose for the fifth straight quarter, the longest stretch of gains since 2010. Gold is up 8.8%, the best performance in a year. For comparison, global equities are up about 6% for the quarter.

More money is flowing into commodities as investors search for investments that can keep up with faster inflation, and metals such as copper face supply shortages. The weaker dollar and lower inflation-adjusted yields, also known as real yields, have made alternative assets more appealing.

“With real rates as low as they are across markets, it’s obviously very attractive to park your dollars in the commodities, which have been under-performing in recent years,” Sanjay Saraf, the head metals market analyst at S&P Global Market Intelligence in London, said by phone.

Other quarterly highlights:

  • Palladium jumped 17%, reaching the highest price since March 2015
  • Aluminum added 16%
  • Lead rose 16%
  • Silver advanced almost 15%

The strength in metals contrasts with weaker performance from energy and agricultural commodities.

West Texas Intermediate crude sank about 6% in the quarter, the biggest drop in more than a year. Raw sugar futures dropped 14%.

“Oil has been softening, but supply tightness has been driving metal prices up,” said Casper Burgering, an economist at ABN Amro Bank NV in Amsterdam.

© 2017 Bloomberg

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