Nickel And Dimed

Nickel And Dimed

over 4 years ago2 mins

Mentioned in story

The US coin of the same name may be three-quarters copper, but investors in nickel aren’t counting the pennies: the metal’s price is up 37% in 2019 😯

What’s going on here?

Nickel was decidedly unfashionable last year: investment bank Goldman Sachs made a tidy profit from betting against it.

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But Goldman changed its tune for 2019 – and nickel has too. Government measures to prop up China’s economy, combined with a spending-friendly pause in US interest rate hikes, gave industrial metals like copper, aluminum, zinc, and nickel their best start to a year since 2008 🎉

And even as the others’ fortunes have waned, things have only gotten better for nickel. While it’s no palladium (see our recent story), Nicky’s price last week hit its highest in a year. Inventories have fallen as smelter issues and floods in Indonesia – a major supplier – have constricted supplies.

And investors are betting that demand will only increase, thanks to the increasing popularity of electric vehicles and batteries. Maybe nickel’s not so dissimilar to palladium after all…

Oh Nicky, you’re so fine (Source: JE Gross)
Oh Nicky, you’re so fine (Source: JE Gross)

Why should I care?

While nickel may seem like a tempting investment option – either directly, through exchange-traded funds, or via nickel miner stocks – its rally may also provide a lesson in caution 🖐

Much of the recent rise has been fueled by investor speculation – and things could quickly change, especially if Indonesian supplies get back up and running. Plus, as with cryptocurrencies (another commodity, according to some), higher prices could tempt HODLers to cash out and sell: in nickel’s case, Chinese stockpiles of the metal recently hit a 17-month high 🤔

While the going is good for now, top-dollar prices based on other investors' speculation should always be viewed with a healthy degree of skepticism.

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