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Investing in Nickel Prices: When Interest Rates Fall, This Goes Up
Last Tuesday, we got the biggest buy signal since November 6, 2002. When we received that buy signal, the Dow closed at 8,771. That market trough coincided with the last time the Fed cut interest rates by 0.5%.
Since then, the markets have done extremely well and that buy signal kicked off a five year bull market. But, while the Dow has returned a mere 57% since we got the signal, there have been a lot of much better performing investments. One of the best performers since that time has been nickel.
As you can see in the chart above, it’s been a great three months for nickel prices. However, this time the sharp rise in price is not due to demand for stainless steel from China or from the ethanol industry’s growth in new plant construction––it’s all a result of interest rates.
When the Fed cuts rates, nickel prices rise. Last Tuesday was just the start. The Fed’s half-point cut sent nickel prices climbing 5%. And as interest rates continue to fall, nickel prices will continue to rise.
And that’s the opportunity that is presenting itself now. The Fed just doesn’t make one move at a time. No, it takes long series of measured steps. In May of 2000, Greenspan pushed the Fed Funds rate to the highest point this decade at 6.50%.
He held steady for the rest of the year, but started cutting in January of 2001. Over the next three years, the Fed would go on to cut rates 12 more times.
Then, with interest rates at 1%, it began hiking rates. In fact, the Fed would go on to increase rates 17 more times between 2004 and 2006. Now, they’re going to be headed back down.
Investing in Nickel Prices.
Since the Fed just doesn’t make random moves from month to month anymore, we’ve got a great opportunity to profit. Last Tuesday’s rate cut was just the start and it will be nothing but good times ahead, if you’re invested properly.
My favorite falling interest rate play is nickel. It moves inversely to interest rates and provides a strong level of safety and plenty of upside as the Fed will begin to cut rates over and over again.
On Thursday, I’ll be releasing the latest issue of BreakAway Investor and in it I detail how to capitalize on the Fed-induced nickel boom and how to invest when interest rates fall.
Shares of the world’s largest nickel producer, Norilsk Nickel (NILSY:Pinksheets), have already soared from $5 to $261 in the past five years. And now there is a big opportunity for the small players in the coming nickel boom.
This tiny company has been quietly tucked away in the Arctic Circle for a while and now its shares are poised to bounce. When I visited it in Northern Russia a few weeks back, I knew there was definitely something good there. As a member of BreakAway Investor, you’ll have first-hand access to this company on Thursday, as well as my latest recommendation, which you can learn about here.
Good investing,
Andrew Mickey
Editor in chief, BreakAway Investor
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