As An Inflation Hedge, Copper’s Better than Gold

For centuries, gold has been a go-to asset among investors worried about all sorts of financial risks. In the past decade, exchange-traded funds backed by the metal drew more money than any other commodity. Even the world’s biggest central banks hoard bullion as a reserve asset.

But when it comes to inflation, which can erode the value of portfolios that don’t keep pace with rising consumer prices, anyone who bought gold as a hedge over the past 25 years missed out on a much better deal copper.

While data shows that broad commodity indices provided the best bang for the buck during periods of rising costs in the US, the red metal stands out.

The ringgit is easily Asia’s strongest currency

The stark shift means that Prime Minister Najib Razak, who has weathered political attacks and protests going back to 2015 over allegations involving state-owned 1Malaysia Development Bhd, may call an early election to cement his hold on power.

Malaysian assets are back in favour as investors focus on encouraging signs of an economic turnaround instead of a scandal that has touched the top of government and as far as Hollywood.

The ringgit is easily the strongest major Asian currency this quarter, climbing twice as much as the next best, the Chinese yuan. Global funds have bought the most Malaysian stocks year-to-date since the same period in 2013, and net inflows to the bond market surged in April-May. Bloomberg

Big opportunity for mine development operators

The opening up of India’s mining sector presents an attractive business opportunity for domestic engineering, procurement and construction firms to become mine development operators (MDOs), according to India Ratings and Research.

Progress will be slow. One out of the four MDOs appointed by central and state power utilities in the last 21 months has started operations and two will do so in FY18, according to Ind-Ra. MDOs need to invest in equipment and infrastructure during the development phase and incur recurring capex as well.

The market potential is sizeable, with “14 captive coal mines owned by central and state power utilities with geological reserves of 6.8 billion metric tonnes are under various stages of bid invitation and evaluation while techno-commercial bids for 19 mines with geological reserves of 9.3 billion metric tonnes are in the pipeline”, according to Ind-Ra.

Overall investment is at 8-10% of the project revenues over the MDO tenure, it takes two-five years to achieve peak production for the mine and Ebitda (Earnings before interest, tax, depreciation and amortization) margins of 25-30%.

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Neal Bhai has been involved in the Bullion and Metals markets since 1998 – he has experience in many areas of the market from researching to trading and has worked in Delhi, India. Mobile No. - 9899900589 and 9582247600

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