Passive investing in mining stocks

Tuesday, 29th October 2019 15:00 - by Rajan Dhall

It's fair to say that since Donald Trump has been around mining stocks have been volatile. When he came to power the fiscal stimulus and all of his "build a wall" antics helped push the price of the major base metals higher. Then came the bad side of the US president. His protectionist stance sent his relationship with China on a downward path and the world biggest consumer of base metals (China) started to falter.

Their GDP dropped and the economy took a turn. Now that relationships are improving the price of copper is rising in turn pushing up the base metals and mining stocks. I will be looking at some base metals stocks later in the article but first, let's look at copper. Since June 2018 the market sold off very hard, moving all the way down from $3.32/lb to $2.48/lb on 2nd September 2019. Since the price based out at $2.47/lb, we have now made a higher low and to keep this trend moving the next level to beat is $2.70/lb. Once the phase one deal is signed between the US and China we could see a break. But the relationship and tone of the talks need to continue to be positive.

Kaz Minerals has made a similar type of chart pattern. A higher low has been created but the trendline would need to be broken for confirmation. The thing that is bothering me about the chart is the volume levels the market needs to have more conviction and back the move higher for me to jump on board.

Glencore is also in a similar position. The price has started to move higher but the volume backing the move is not great in comparison to historical levels. The level on the upside for this stock is at 272.65. Having said that since 2016 the price has moved from around 69p to 339.90 today. Moving forward the share price needs to build more momentum, resistance levels are made to be broken but the way it happens is also important. The base metal stocks have been in a state of limbo for a while now. Maybe it is time we see a breakout?

The long term world GDP forecasts from the likes of the IMF are not great but if China and the US manage to come to a truce and move forward past phase one, possibly to phase two even we could get even more of a rally. The price charts are all showing signs of a turnaround but the confirmation signals are yet to arrive. If the copper price heads over to the consolidation highs of $2.94/lb upward then the base metal shares could potentially follow. 

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.