Last month we got on James Bullard’s case for saying he saw no evidence that QE2 was a factor in driving up commodity prices, with the St Louis Fed president suggesting it was more likely related to normal supply and demand. We think a simple glance at the charts of a host of commodities would be enough to get Mr. Bullard to recant, as he observes the steeply slanting lines running from lower left to upper right, beginning roughly in late August.
In case he needs some more “evidence,” here’s a real-world observation from Mark Millett, on Steel Dynamics’ (STLD) fourth quarter conference call today (Millett is operating chief of STLD’s OmniSource unit — emphasis added is ours):
Nonferrous shipments quarter-over-quarter were down 10% to 230 million pounds largely due to depressed foreign demand, particularly in copper — depressed copper market, while that demand was certainly not reflected in market pricing as the Comex rose 22% through the quarter, clearly demonstrating the dislocation of supply and demand metrics from the market indices and also the growing impact of hedge trading and also exchange-traded funds that require physical backing.
Comex copper was up for a second-straight day today, but is off about 2.5% from its Comex record close on January 3. It’s up more than 28% vs a year ago.
Image courtesy of Wiki Commons.