The BMO S&P/TSX Equal Weight Global Base Metals Hedged Index ETF (TSX: ZMT) tracks the metals and mining sector. Market sentiment has been negative on the metals and mining sector since 2013 as a slowdown in China combined with oversupplies has led to a pullback in prices of several commodities.
In the last three months though, ZMT has seen a sharp rebound. Indeed, the fund is up 17.62% in the last three months. The gains have come as several commodities, including iron rallied. However, the rally in most commodities was driven by speculation and not fundamentals. In fact, the rally has already faded and not surprisingly, we are already seeming a pullback in ZMT. In the last one month, ZMT has fallen more than 10%.
ZMT though could see further see losses as the near-term outlook for commodities such as iron ore is extremely bullish. Iron ore, which crossed $70 per ton last week, is down to $50 per ton. Analysts though believe that the commodity could drop to $35 ton in the second half of this year. Apart from weak demand from China, commodities will be also under pressure due to a strengthening dollar.
