Bank of Nova Scotia index declines for fifth month

Bank economist Patricia Mohr says base metal prices have dropped by 16% since January. In addition, gold and silver prices have weakened alongside a stronger U.S. dollar and reduced inflation expectations. The bank’s metals and minerals sub-index was off 7.1% in June from the previous month.

Mohr says the decline in base metal prices “reflects a reduction in metal inventories by U.S. manufacturers in response to slower economic activity as well as less speculative investor interest.”

A slowdown in residential construction south of the border and in the United Kingdom has reduced the demand for copper and aluminum in water tube, building wire and window frames. But strong demand for most industrial metals continues in the capital goods industries in Japan, Europe and the U.S.

“Some pick-up in metal (particularly copper) prices is expected by the fall, after a normal slowdown in orders over the summer months,” writes Mohr, adding that copper will probably rally in response to the drop in LME inventories. She cautions prices will likely move lower again in 1990.

The all-commodity index tracks export prices of a variety of Canadian commodities, which are weighted according to their 1984 export values, except crude oil where the value of net exports is used.

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