EUROPE A red, white and blue candle flickering in the wind

Nov 01, 2007 | 08:07 AM |

The U.S. Federal Reserve reversed course in September and eased monetary policy, cutting the federal funds rate to 4.75 percent from 5.25 percent. Historically, the funds rate and metal prices have been positively correlated, largely because rising interest rates went hand-in-hand with a strong economic performance (and hence metals demand), while an easing in monetary policy usually took place in the environment of a decelerating U.S. economy.

In my view, the current macroeconomic picture in the United States is certainly not bullish and the fundamentals are now not as strong as they were before the economic slowdown.

However, there are some factors that should mitigate the impact of the deceleration in North America, so metal prices are likely to remain relatively well supported from the demand side (for many metals, supply additions are still not massive).....