Mining stocks: Investors pile into miners as commodity rally heats up

Already a subscriber?Dire earnings forecasts for commodity producers are being hastily rewritten as brokers play catch-up to the surge in commodity prices that took off last month, compelling investors to rethink the resources sector as a source of returns.

The London Metal Exchange Index has surged more than 10 per cent quarter-to-date while precious metal prices are up 9 per cent.That has set the scene for a potential recovery in miners’ valuations given their share prices often lag commodity prices. Citi forecasts that gold, silver and copper have room to push 5 per cent to 10 per cent higher over the next three months and perhaps even 15 per cent to 20 per cent over 12 months.

Traders have already begun piling back into physical commodities following a softer period last year when battery metals like lithium and nickel plunged. Indeed, Bank of America’s monthly fund manager survey showed a record jump in allocations to commodities this month. But that trend is tipped to reverse over the next six months as analysts turn increasingly bearish on the banks on valuation grounds.

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