Metal & Mining Sector 3Q Boost



By: YOSEF TASTASSA  
Published: November 3rd 2010
in Economics » World

Copper
Pic: WikiMedia Commons

Investment and ROI

 

If you had 100,000 Dollars in July 2010, and you invested them in the TSX Metal & Mining sector, three months later you will find yourself with an extra 50,000 Dollars. Not bad revenue for three months of staring at the financial screens.

 

If you put the same 100,000 Dollars in the Metal & Mining sector in 2002, they'd be worth no less than 600,000 Dollars today – 75 per cent a year.

 

Sector surges

 

I wrote earlier this week that the Metal & Mining sector has kept boosting the TSX Index for a long time. Until three months ago the sector’s Index was "dancing" between 800-900 points. In July 2010, the change started; the sector's Index was around 980 points by the end of the month; it was nearly 1,150 points by the end of September.

 

Yesterday, November 2, the sector boosted by more than 1 per cent to its highest peak ever - 1,253.25 points.

 

World demand and markets' fear

 

Why is this happening? The answer depends on the sector within the Metal & Mining sector.

 

For example, if we look at the prices of Silver, Gold, Platinum etc. we will see a constant increase in their prices. So if you are a mining company, and you own the mine you dig in, then the value of your company grows with the value of the metal buried underground.

 

When looking at the markets, especially the consumers' sentiments, it can be easily understood why people rush to dear and precious metals: it is because they don't trust the financial sector.

 

The financial sector has been "dancing' around 180 points for over a year. There is a very interesting correlation between these two.

 

 

 

India and China

 

When looking at Copper prices, we should look at China and India. These two economies keep growing at a two-digit pace per year. Copper is a major industrial component, especially for electricity and communications. When prices go up as the demand increases, the winners are once again the mining companies and those who own the rights to dig the metal out.

 

What to do next?

 

The question now is how far can it go? Is it time to sell, and walk away with our 50 per cent profits in three months, 600 per cent in eight years, or should we stay longer in the market assuming that the demand and panic will grow? That, in this case, is for our benefit.

 

Personally, I think that a 50 per cent ROI (return of investment) in three months is fantastic. If you think that the sector will keep surging, leave your money where it is. Just be prepared to bear the risks.

 

If you have some doubts, you can sell a portion of your portfolio and put the money in a low risk investment. In this case your portfolio will be more stable and will be less impacted by market changes. You will not gain that much when markets climb or you will not lose that much when markets fall.



Related articles: (metal, mining, economy)
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