The existence of metal price cycles

Abstract Fluctuations in metal prices have been of interest not only because of the instability they impose on the metal industries but also because of the extent to which they reflect changes in business cycle activity. Regularities in these fluctuations have often been characterized as cycles, even though any periodicity they might possess is confounded by stochastic shocks. Our purpose is to focus on short-term price movements, so as to obtain greater information concerning the forecasts needed for purchasing, making sales, trading and performing other day-to-day activities in the metals industry. The metals we study include aluminum, copper, gold, lead, nickel, silver, tin, tungsten and zinc. This study begins with standard business cycle identification procedures employed in macroeconomic research. After applying the Weibull test of cyclical duration to the discovered cycles, the structural time series method is employed to confirm further the statistical significance of the cycles, not only over the total period beginning 1960, but also over appropriate sub-periods. Finally, conclusions are drawn regarding the significance of the cyclical findings.

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