Zinc wins, nickel loses in index reweighting

Nov 24, 2010 | 09:45 AM | Thorsten Schier

Zinc prices could get a boost in December ahead of the annual reweighting of two major commodity indices early next year, while nickel is expected to lose big.

"Nickel is probably the biggest loser," one U.K.-based analyst said. "Zinc wins out the most."

Reweighting the indices, which represent base metals among a fixed basket of other commodities, often triggers significant buying and selling of futures contracts by index-tracking funds.

Macquarie research estimates that the Goldman Sachs Commodity Index (GSCI) and the Dow Jones UBS Commodity Index (DJ-UBS) rebalancing will result in net buys of 100,000 tonnes of zinc, 38,000 tonnes of aluminum, 8,000 tonnes of lead and 2,000 tonnes of copper—as well as the sale of 15,000 tonnes of nickel.

The indices are compiled on a percentage value for each metal. The DJ-UBS takes into account world production, traded volumes and prices at the start of the new year, while the GSCI focuses only on production. ....

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