LONDON (Commodity Online): Commerzbank figures any downward price corrections in base metals are likely to be limited, particularly since any weakness in the U.S. economy could lead to a third round of quantitative easing in which the Federal Reserve purchases Treasury securities to push down long-term yields.
According to Commerzbank, the rally in base metals since the start of the year may have occurred too quickly, meaning an increased chance of profit-taking or a correction.
“However, we believe this is unlikely to be sustained, since the latest, weaker U.S. data have probably also increased the likelihood of a new round of monetary easing measures in the U.S., a so-called QE3,” Commerzbank added.
“The announcement of QE2 was a major factor in the sharp rise in metal prices in 2010. Such a move could also be supported by the purchasing managers' index for the manufacturing sector in China which, contrary to expectations, rose slightly in January, but leaves the door open for further monetary easing,” Commerzbank concluded.
