Mastère spécialisé MIRIS

Industrie des ressources minérales & société

Metal prices

Bernardo Villegas
Table of contents

1. Exploratory data analysis ...................................................................................................................... 1

1.1 Tendency of metals ....................................................................................................................... 1
1.1.1 Price Platinum ....................................................................................................................... 1
1.1.2 Price Gold .............................................................................................................................. 1
1.1.3 Price Silver ............................................................................................................................. 2
1.1.4 Price Tin................................................................................................................................. 3
1.1.5 Price Nickel ............................................................................................................................ 3
1.1.6 Price Zinc ............................................................................................................................... 3
1.1.7 Price Lead .............................................................................................................................. 4
1.1.8 Price Copper .......................................................................................................................... 4
1.2 Descriptive statistic ....................................................................................................................... 5
1.3 Metal Price correlation ................................................................................................................. 5
2. Principal components analisys .............................................................................................................. 9

Table of Figures

Figure 1.1: Price gold and platinum .............................................................................................................. 1

Figure 1.2: Price Silver................................................................................................................................... 2
Figure 1.3: Price Tin and Nickel ..................................................................................................................... 2
Figure 1.4: Price Zinc and Lead ..................................................................................................................... 3
Figure 1.5: Price Copper ................................................................................................................................ 4
Figure 1.6: Plots of Correlation : .................................................................................................................. 7
Figure 1.7: Boxplot metals ............................................................................................................................ 8
Figure 2.1: Explanaition PCA plot ................................................................................................................ 11
Figure 2.2: PCA plot with 2 components .................................................................................................... 11
Table of tables

Table 1.1: Statistic basic of metal prices in 59 years .................................................................................... 5

Table 1.2: Basic statistics of price metal in lasts 5 years .............................................................................. 5
Table 1.3:Table of correlations during price metals during 5 years ............................................................. 6
Table 1.4: Table of correlations during price metals during 59 years ......................................................... 6
In the following document, the price of 8 metals will be studied and analyzed; Copper, Lead, Tin, Nickel,
Zinc, Gold, Platinum and Silver. This analysis will take into account closing prices that were presented
month by month during the last 59 years.

1. Exploratory data analysis

1.1 Tendency of metals

The metal graphs shown below are simply organized according to the similarity of their values, for example, gold
and platinum are shown in the same graph.

Figure 1.1: Price gold and platinum

1.1.1 Price Platinum

During 1960 to 1974 there was a steady increase of approximately 7 $/ ozt, reaching 200 $/ ozt.

From 1976 to 1998 it can be seen that there was a variation in the price, where the maximum value was in 1980
reaching 600 $/ ozt and a final value in 1998 with a price of 400 $/ ozt

From 1998 to 2010. The largest rising of its value in its history. A constant increase was generated until 2006, reaching
1590 $/ ozt, then there was a short period of 2 years where the low price and finally reached its maximum historical
value in 2010 of 1720 $/ ozt.

During the last 9 years there has been a downward trend in the price of Platinum, of approximately 80 $/ ozt

1.1.2 Price Gold

From 1960 to 1970 there were no significant variations. Then in 1972 to 1980 there was a significant increase,
reaching 600 $/ ozt, increasing its price in 8 years by 300%.

In 1980 to 1982 the price decreased 220 $/ ozt. Then there was a relative record until 1994 where the price was 400
$/ ozt.

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In 2000 the price was $ 300 / ozt, from there, the price increased steadily, reaching its all-time high in 2012 ($ 1700
/ ozt).

In the last 7 years the price has been close to $ 1300 / ozt.

Figure 1.2: Price Silver

1.1.3 Price Silver

From 1960 to 1972 the price increased slightly from 1 $/ ozt to 5 $/ozt. After 1978 to 1980 there was a very rapid
increase from 5 $/ ozt to 20 $/ozt, that is, in two years the price increased by 400%.

Since 1972 the price decreased to 6 $/ozt in 1986. Then there was a period of almost 20 years when the price was
relatively constant and close to 5 $/ozt.

In 2004, a sustained increase began, reaching its maximum historical value of 35 $/ozt in 2011. After this year the
price fell to 16 $/ozt in 2015, which has been the average for the last 4 years.

Depending on the periods of the variations of these three metals, it could be considered that there is a correlation.
In the following chapters it will determine this.

Figure 1.3: Price Tin and Nickel

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1.1.4 Price Tin

There was a slight increase from 2000 to 3,500 $/ t during 1960 to 1970. Then an increase of a large slope between
1972 to 1980, increasing the price from 5000 to 16,000 $/ t, that is, the value increased 300% in 3 years

From 1980 the price decreased to 6,500 $/ t in 1985. Then the price remained close to 5,000 $/ t for almost 15
years.

In 2002, the price increased steadily, reaching its highest value in 2011, a price of 25,000 $/ t. As of 2011 the price
fell to 16,000 $/ t in 2014.

The last 5 years the price has been close to 19,000 $/ t.

1.1.5 Price Nickel

There was a slight and steady growth from 1960 to 1984, where the price started at 2000 $/ t and ended at 5000 $/
t.

In 1986 until 1988 it increased from 5,000 $/ t to 14,000 $/ t in just two years, almost 300%. Then there was a
decrease for 5 years, reaching 5000 $/ t again. From 1993 there were a series of variations around 6000 $/ t until
2001.

In 2002 there was a sustained growth, reaching its maximum history in 2007, of 37,000 $/ t, that is, it increased by
almost 600% in 5 years. After 2002 there was a decrease with the same slope as the growth was, reaching 1,500 $/
t in 2009. Then there was a reactivation and the price in 3 years rose to 23,000 $/ t.

From 2011 to 2016 the price fell again, reaching 10,000 $/ t. During the last 3 years there has been a cycle of slight
increase, surrounding 13,000 $/ t.

Figure 1.4: Price Zinc and Lead

1.1.6 Price Zinc

Between 1960 and 1972 the price remained almost constant and close to $ 250 / t. Then there was a first big
increase that reached the price of 1250 $/ t in 1974, increasing 500% in just 2 years. Then the price decreased to
600 $/t in 1977.

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Between 1977 and 1986 there was a slight growth, increasing the price by 25%. Then in 1986 there was a
considerable second growth, reaching the price of 1650 $/t in 1989, that is, the price increased 200% in 2 years.

In 1989 in price the price had a variable decrease, reaching 750 $/t in 2002. In this year, there was the third and
largest increase, reaching 3,250 $/t in just 3 years, an increase of almost 400%

In 2007 the price decreased to 1700 $/t in 2 years. In the last 10 years the price has presented 3 cycles of growth
and decrease, and its last values are close to 2600 $/t.

1.1.7 Price Lead

From 1960 to 1971 the price remained almost constant and close to 250 $/t. Then there was a slight growth, reaching
500 $/t in 1977.

The first big increase was in 1977 until 1979, where it reached 1250 $/t, increasing 250% in 2 years. Then the price
decreased to 450 in 1983, and remained close to this value for 3 years.

In 1986 until 2002 there were 2 cycles between 450 $/t and 800 $/t. From this year the most important growth was
generated, reaching its historical maximum of 2550 in 2007. This increase was 300% in 5 years.

During the last 10 years there have been 2 cycles between 1700 $/t and 2300 $/t with an average of 2000 $/t.

Figure 1.5: Price Copper

1.1.8 Price Copper

From 1960 to 1971 the price remained almost constant and close to 250 $/t. Then there was a slight growth,
reaching 500 $/t in 1977.

The first big increase was in 1977 until 1979, where it reached 1250 $/t, increasing 250% in 2 years. Then the price
decreased to 450 in 1983, and remained close to this value for 3 years.

In 1986 until 2002 there were 2 cycles between 450 $/t and 800 $/t. From this year the most important growth
was generated, reaching its historical maximum of 2550 in 2007. This increase was 300% in 5 years.

During the last 10 years there have been 2 cycles between 1700 $/t and 2300 $/t with an average of 2000 $/t.

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1.2 Descriptive statistic
Below are the basic statistics of the 8 metals.

Copper Lead Tin Nickel Zinc Gold Platinum Silver

Min 607 141 2163 1631 177 35 79 1
Min 9868 3720 32363 52179 4405 1772 2052 43
Mean 2860,6 857,4 9452,8 8405,4 1136,2 463,5 551,4 8,2
Sd 2277,1 717,8 6405,9 7187,2 804,9 442,9 461,9 7,6
cv 80% 84% 68% 86% 71% 96% 84% 93%

q75 3170 1018 13808 11129 1559 500 832 12

q50 1803 552 6688 6134 939 355 411 5
q25 1376 387 4436 3644 618 132 160 4

Table 1.1: Statistic basic of metal prices in 59 years

All metals have large dispersions, since 59 years of data were taken into consideration. The price of Gold presented
greater dispersion, while Tin the lowest dispersion.

When considering the last ones, the table presents the following results.

Copper Lead Tin Nickel Zinc Gold Platinum Silver

Min 4472 1618 13808 8299 1520 1076 791 14
Min 7066 2584 21652 17657 3533 1511 1242 20
Mean 5813,4 2041,5 18672,5 11591,2 2482,0 1254,4 948,5 16,3
Sd 725,7 265,5 2159,2 2092,1 513,2 86,0 104,2 1,3
cv 12% 13% 12% 18% 21% 7% 11% 8%

q75 6295 2243 20458 13026 2787 1301 987 17

q50 5882 2005 19446 11336 2570 1251 945 16
q25 5217 1815 16898 10192 2098 1200 860 15

Table 1.2: Basic statistics of price metal in lasts 5 years

When considering the last 5 years, the statistics of central tendency increase, while the dispersion decreases.

The metal that has shown the greatest dispersion in the last 5 years is Zinc, while Gold has the lowest dispersion.

1.3 Metal Price correlation

The correlation coefficient is a measure of the relationship between two quantitative random variables, and is
expressed as follows
𝜎𝑥𝑦 ∑𝑛𝑖=1 𝑥𝑖 ∗𝑦𝑖 ∗𝑓𝑖
r = (𝜎 and 𝜎𝑥𝑦 = − 𝑥̅ ∗ 𝑦
̅
𝑥 ∗𝜎𝑦 ) 𝑁

r, is the ratio coefficient, σ_xy is covariance, σ_x standard deviation of variable x, σ_y is the standard deviation of
the variable y, f_i is the frequency of each pair, N is the total of pairs, x ̅ * y ̅ is the multiplication of the averages of

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the variable x and y. The results of the correlations are shown below. Table 1.3 shows the correlations in the last 5
years and table 1.4 considers the data since 1960.
COPPER LEAD Tin NICKEL Zinc GOLD PLATINUM SILVER
COPPER 1
LEAD 0,79 1
Tin 0,64 0,76 1,00
NICKEL 0,63 0,33 0,25 1,00
Zinc 0,87 0,92 0,86 0,39 1,00
GOLD 0,34 0,40 0,44 0,51 0,49 1,00
PLATINUM -0,19 -0,15 -0,23 0,05 -0,24 -0,09 1,00
SILVER -0,05 0,32 0,28 0,07 0,23 0,51 0,56 1,00

Table 1.3:Table of correlations during price metals during 5 years

Low correlations are seen

COPPER LEAD Tin NICKEL Zinc GOLD PLATINUM SILVER
COPPER 1,00
LEAD 0,94 1,00
Tin 0,82 0,87 1,00
NICKEL 0,84 0,79 0,61 1,00
Zinc 0,88 0,86 0,69 0,84 1,00
GOLD 0,90 0,90 0,88 0,67 0,79 1,00
PLATINUM 0,94 0,90 0,80 0,85 0,79 0,89 1,00
SILVER 0,85 0,84 0,90 0,65 0,67 0,92 0,87 1,00

Table 1.4: Table of correlations during price metals during 59 years

As the amount of data increases, correlations rise significantly.

The 5 relationships that have a higher ratio coefficient are; Copper-Lead, Copper-Platinum, Silver-Gold, Silver-Tin,
Copper-Gold. The scatter plots of these relationships are presented below.

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Figure 1.6: Plots of Correlation :

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1.4 Analisis exploratorio

Boxplot of Tin; NICKEL Boxplot of GOLD; PLATINUM

50000 2000

40000
1500

30000
Data

Data
1000

20000

500
10000

0 0
Tin NICKEL GOLD PLATINUM

Boxplot of COPPER Boxplot of SILVER

10000
40

8000

30

6000
COPPER

SILVER

20
4000

10
2000

0 0

Boxplot of Zinc; LEAD

5000

4000

3000
Data

2000

1000

0
Zinc LEAD

Figure 1.7: Boxplot metals

In the boxplot of metals it is seen that in each of the metals there are anomalous data, mainly due to the
increase in the price of metals at the beginning of this century.

• Copper was the one with the most outliers together with nickel and silver
• Lead Q1 is very close to its average
• Tin and Platinum have less anomalous data

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2. Principal components analisys

The main component method aims to transform a set of variables, which are called originals, into a new set of
variables called principal components. The latter are characterized by being incorrectly interrelated and, in addition,
can be ordered according to the information they have incorporated. As a measure of the amount of information
incorporated into a component its variance is used. That is, the greater its variance, the greater the amount of
information that this component has incorporated. For this reason, the one with the highest variance is selected as
the first component, while the last component is the one with the lowest variance.

For the case study, the correlation matrix shows that there is a relationship between metals, therefore it is
interesting to perform PCA in this case.

2.1 Data Normalization

In the case of study, there are two different units that are dollars per pound and dollars per ton, therefore, the first
step will be to normalize the values, so that you can work on a single magnitude of data, for this the standardization
will be performed from the data, which is basically subtracting each variable from its mean and divide it by the
standard deviation. In R this can be done with the “scale” function.

2.2 Principal component

Once it is known that the data is correlated according to the correlation matrix, and already standardized, you can
use the “prcomp” tool in R to perform the PCA. This function basically delivers the standard deviations of the original
variables according to the unique values (rotated in the plane).

The proportion of variance for each component will be as follows:

In this way, it is seen that only the first component has 85% of the variance, due to the high correlation of
the price of these 8 metals.

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The question How many components should be used to represent all the variables? It can be answered according to
the Kaiser criteria, which basically says that the self values (variances) of the components that are greater than 1
must be preserved.

To know this, the standard deviations of each component must be squared;

That is to say that component 1 is the only one that has variance greater than 1, therefore, with this component it
is sufficient to represent the 8 metals.

It looks like CP1 explains the 8 variable with almost the same weighting (orthogonal correlation matrix
transformation). Copper being the best explained and Zinc the worst.

2.3 Plot PCA

Basically, to interpret the graph of the components, only the angles that are generated between the variables
involved must be taken into account, that is, the greater the angle, the less correlation and the lower the greater
the correlation. The direction of the variables will indicate which component best represents this component, the
figure explains this.

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 Figure 2.1: Explanaition PCA plot

To make this graph, the 2 main components are needed. The result is as follows:

Figure 2.2: PCA plot with 2 components

When represented in 2 components, it looks like platinum copper and Lead are represented in almost the same way
in the plane.

In conclusion, it can be said that only 1 main component is sufficient to represent these 8 metals due to the high
correlation between them.

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