Base Metals

Reuters reported that although copper and iron ore prices are both set to go up, iron may gain more than the red metal.

Reuters reported that although copper and iron ore prices are both set to go up, iron may gain more than the red metal.

As quoted in the market news:

While there are fundamental reasons why iron ore may outperform copper, perhaps the most convincing analysis is looking at the price ratio between the two.

Looking at the ratio between the two over the past four years, there have been about three periods when the ratio has reached levels above 80 for a sustained period before the current occurrence.

In March 2009, the ratio was about 83 times, in September of the same year it was above 95 and in October last year it was 81.

Each time the ratio has reached these levels, it has subsequently moved lower.

For example, by mid-August 2009 it was down to 68, by April 2010 it fell to 47 and in November 2011 it was 59.

What is common to the three examples above is that every time the ratio was high, it moved lower by iron ore rallying harder than copper.

Click here to read the full Reuters report.

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