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Originally posted by horgad

Nickel prices are driven by two things: demand for stainless steel and inflation. Stainless steel demand is driven by economic growth. The countries to watch in this regard are China, US, and Japan.

IMHO the US is heading into a recession and a possible deflation. If deflation occurs this could be very bad for base metals. The deflation will occur because credit + cash = money supply. When credit is destroyed, like what is happening now with subprime mortgages, money basically vanishes into thin air. If this happens on a big enough scale cash can go up in value as its demand increases. (People need cash to pay down their debts because the time fo easy loans is gone.) When cash goes up in demand and value, everything else goes down in value (like copper and nickle).

On pro nickel side, the Chinese economy may completely to ignore the US problems and continue chugging along at a crazy pace. Also you can almost count on the US government trying to print its way out of a deflation. So any deflation might be short lived and followed quickly by another bout of inflation.

My own views are short term bearish on nickel and copper. However, I do think that there is a good chance that nickels will never see a melt value of less than $.05 again and I do think there is a good chance that this is the last year that you will be able buy nickels in their current form for $.05 each.

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