Synchronization and Co‐Movement of Metal Prices

Abstract

This paper investigates the correlation and synchronization of cycles in the real prices of aluminium, copper, lead, tin, zinc, gold and silver from January 1947 through to July 2008. Standard correlation coefficients show strong correlations between all pairs of these prices, but this measure is difficult to interpret because it combines both the amplitude, duration and timing components of the movements in prices. The duration and timing of the cycles are measured separately using several cycle identification techniques. The co‐movements among the cyclical indicators from all these methods show very strong synchronization. We reject the hypothesis that these metal prices move independently of each other. This result indicates that there may be a ‘common cycle’ to real metal price movements and implies that price risk for producers and consumers of these metals is mostly systematic, or non‐diversifiable.

Acknowledgements

The author wishes to thank Dr Maria Schutte for providing direction and editorial assistance.