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Industrial metal prices have been rising strongly in recent weeks despite weak growth in the global economy.
Why? One reason is that the election of Donald Trump as the next US president has raised hopes that he will sign off on an increase in overdue infrastructure spending. The other reason is that a new wave of speculative money in China has rolled into the metals market.
Prices of metals such as copper, zinc and lead are often considered to be the leading indicators of global economic activity. The massive bull run in these metals was fuelled by the strong demand in China as it built its infrastructure. Industrial metals have become cheaper over the past three years as the Chinese economy slowed down. The questionable assumption right now is that new infrastructure spending in the US will more than make up for the fall in Chinese demand.
India needs to watch these prices closely since they will affect the costs of all the infrastructure that still needs to be built.