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Heavy Metals

0712_Metals

Image source: amadeustx / Shutterstock.com

What's going on?

The price of metals including copper and zinc fell by 4%, to lows not seen in a year, on Wednesday. Investors are worried about the impact of mounting trade tariffs and bracing themselves for the possibility of lower economic growth in the future.

What does this mean?

Copper’s used in loads of stuff – from electric cables in televisions to roofing on buildings. When economic growth is high, people buy and use more copper, so investors look to its price as an indication of how the global economy’s doing.



Since there’s not been much change in the supply of copper, zinc or lead, the drop in price could suggest investors are selling in anticipation of lower future demand (due to slower-than-expected economic growth).

Why should I care?

For you, personally: New import taxes (a.k.a. tariffs) could lead to higher prices.


On Tuesday, the US government published a list of Chinese products that, at the end of August, will face 10% import tariffs. Targeted items include consumer products like food, tobacco, toilet paper and handbags and could (if you live in the US) result in higher prices next time you buy a purse or pair of skis. Since the average worker doesn’t have much more extra money than last year, people are likely to tighten the purse strings.



The bigger picture: Cheaper metals could actually stimulate economic growth.


Companies facing tariffs are debating whether to raise prices (which could put off customers and result in fewer sales), or – like Daimler – keep prices the same (and accept lower profits). Either way, the outcome’s usually lower economic growth, so firms will probably buy fewer metals to make their products in the future. That’s unless prices drop so much that it sparks companies and people to resume buying, which will reinvigorate growth. It’s the economic circle of life!

Originally posted as part of the Finimize daily email.

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