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Gold's Loss is Nickel's Gain -- Sign of Economic Rebound

Posted by: Joe Weber on June 18

nickelmine.jpg Gold tends to attract the fearful. So, for anyone optimistic about the economic outlook, it’s very good news indeed that gold prices are sliding. What’s even better news is that a far more mundane mineral, nickel — being mined here in this photo from Australia —is seeing a surge.

As the economy has perked up, nickel prices have risen from below $5 a pound in April to above $7 now. Of course, the industrial mineral has a long way to go to get anywhere close to the nearly $25 a pound it commanded in the spring of 2007. But the gains, reported on by BUSINESS WEEK, are still encouraging to metal-watchers.

Indeed, some analysts expect the price to continue climbing as investors become convinced the economic free-fall is over and recovery is approaching, if not under way already. The price of the base mineral, used in producing stainless steel, has been helped by the hoarding of Chinese producers who figure they won't see such low prices again for a while, analyst Bart Melek of BMO Capital Markets (BMO) says.

Some analysts, such as those as Deutsche Bank (DB), expect gold prices to continue to struggle. Historically, the Deutsche Bank experts say, gold prices tend to underperform those of industrial metals when general price levels reinflate after bad times.

Why the divergence? Sentiment for gold is being weakened by expectations that the Federal Reserve will move against inflation -- whenever that distant prospect surfaces for real -- by raising interest rates.

Longer term, nickel's upswing may endure because of its trendy applications. Phil Flynn, a market analyst with Alaron Trading in Chicago, says it plays a role in rechargeable batteries and may prove important in the move to fuel-efficient cars. Says Flynn: "It's a very hot industrial metal."

Thank you for your interest. This blog is no longer active.



BusinessWeek’s Joe Weber, Patricia O'Connell, Michelle Conlin, Frederik Balfour, Peter Coy, Greg Spielberg and Roger Crockett examine The Case for Optimism by looking past the financial turmoil and economic unrest gripping the globe to focus on the promising future that lies on the other side of this storm. We’ll chronicle the forward thinkers investing in R&D, launching promising new products, entering new markets, or implementing management and leadership.

See why BusinessWeek Editor-In-Chief Stephen J. Adler is optimistic about the economy amid the sharpest downturn since the Great Depression.

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