There was a general pullback in industrial metals and mining on Wednesday on the back of a stronger dollar and lingering worries about global growth. But the dip doesn’t mean that the upward momentum is now broken.

There hasn’t been a lack of skeptics about prospects for the sector and at the start of the year producers themselves may not have expected nickel above $10,000 by mid-year, iron ore building a base above $50 or zinc up by 40% by July.

This chart from Capital Economics shows that industrial metals are now all trading above their 100-day moving averages, an indicator that the rally may be more than a flash in the pan.

The London-based independent research firm also point to the fact that the complex, with the exception of tin and iron ore, has moved out of backwardation into contango – where futures prices are higher than the spot price – a move lead by sector bellwether copper:

“A combination of improved investor sentiment and supply concerns (notably for nickel and zinc) underpinned the recent strong performance. The metals markets shrugged off some relatively subdued data out of China, perhaps on hopes that this could encourage further policy stimulus.”

Source: www.mining.com