The miracle commodity saves!

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You are perhaps bemused that I follow the iron ore price with such regularity but to me it is bizarre that its price movements are not front page news every day. To be frank, you could scrap the business pages of every paper and simply print the iron ore price and you’d get a better guide to the future. The miracle commodity makes up roughly 25% of Australia’s terms of trade and as such is the single most important metric for the Australian economy (along with its bosom buddy, coking coal). In my view, this commodity determines the price of our currency, the levels of our interest rates, the price our banks pay for offshore money, as well the value of your home and super portfolio via the stock market. Pay attention I say.

Today the news is good. Yesterday the miracle commodity managed to rally through the top of its recent trading range:

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At $147.70, ore has hit its highest point since last year’s collapse. Hardly a decisive breakout from the previous high of $147.30 but encouraging nonetheless. My feelings on the China landing are unchanged, that it will be more bumpy and longer than consensus expects and, like yesterday’s stock market jump, I can’t help feeling that this is a bull trap, but that is only speculation versus the reality of a rising price.

So long as this price remains strong, so does Australia.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.