Aluminum has been experiencing quite a rally under puzzling circumstances. Like most commodities aluminum has taken it on the chin in the last year. But, in the last three months the performance of the ETN that tracks aluminum, the iPath Aluminum ETN (ticker JJU), is up over 17%. The puzzling part is that some say there are excess inventories yet the metal keeps climbing in price.
Aluminum’s Stregnth
Miles Johnson for the Financial Times reports that short covering could be driving prices up. Investors have assumed that the market for the metal was weak given the global slowdown. Conversely, there is also a fear that production will be cut driving some companies to pay higher prices to ensure their supplies are sufficient. Complicating the picture further is China. Should China, the world’s largest producer and consumer of the metal, begin gobbling up more than she can produce prices could be driven up further. In the end we are left with what Alan Greenspan would call a conundrum around aluminum.
- At this point (JJU) is over 4% above its 50 day EMA and still 16% below its 200 day EMA.