Tuesday, April 04, 2006

Metals Are Burning Up the Market

Metals Are Burning Up the Market

Aluminum is up 22% and zinc almost 40% as demand for heavy equipment, airplanes, and infrastructure such as highways and railroads remains strong across the globe.

Aluminum is in high demand to build aircraft ordered by Asian and Middle Eastern carriers while zinc is needed to produce galvanized steel. (Railroad and other infrastructure projects in emerging markets are fueling steel demand.)

Jewelry demand rose 14% measured in dollars, industrial demand increased 11%, and investors upped their purchases by 37%, including a 67% increase from exchange-traded funds in the U.S. and elsewhere, the council reported.

On the supply side, mines produced only 1% more gold than they did in 2004. Frank Holmes, chief investment officer at U.S. Global Investors in San Antonio, has been bullish on gold throughout the current cycle; he points to the run-up in oil as an overlooked factor. Billions of petrodollars have already flowed into gold, he says. Based on the historic relationship between the two commodities, he says, gold should hit at least $700 within a couple of years.

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