Small gain in metals sub-index

The metal and mineral sub-index of The Bank of Nova Scotia’s commodity price index edged up slightly in June, putting a halt to a 4-month decline.

Economist Patricia Mohr reports that base metal prices appear to be bottoming out, although most prices are no higher than average cash costs in Western countries.

London Metal Exchange (LME) nickel prices held up relatively well in May and June (US$2.62 and US$2.51 per lb. respecitively) but retreated to US$2.20 in late July — a level also below average cash costs. Disappointment over continued high levels of Russian exports contributed to the decline, and Mohr anticipates further mine cutbacks in Canada and other producing countries. London gold prices surged to US$394 per oz. in late July from US$367 in May and a low of only US$329 in January and February. Mohr notes that gold demand was strong in China, Hong Kong and Singapore earlier this year, though jewelry manufacturers in these countries are very price-sensitive and their purchases have recently waned.

Although inflation remains largely dormant in the U.S. and Canada, many U.S. commodity funds have added to their gold positions, expecting the consumer price index to pick up. Mohr says crop damage from flooding along the Mississippi River has raised expectations of higher U.S. food prices. The metal and mineral sub-index was up 0.32% in June from May but off by 14.5% from one year ago. The all-items index declined by 0.7% in June to a level 5.1% below a year ago.

The all-commodity index tracks export prices of various Canadian commodities which are weighed according to their 1984 export values (except crude oil, for which the value of net exports is used).