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Gold and copper prices have climbed for three straight weeks, the longest rally since at least mid-AprilMICHAEL DALDER/Reuters

Investors are jumping back into metals they were dumping as recently as a month ago.

A global slowdown has increased speculation that U.S. growth will cool enough to force Federal Reserve policy-makers to wait longer before raising interest rates again. The prospect of delays sent the dollar lower and gave metals a boost as alternative investments. Speculators increased their bets on price gains for gold and silver and got less bearish on copper.

Gold and copper prices have climbed for three straight weeks, the longest rally since at least mid-April. The 80-member Bloomberg World Mining Index jumped 8 per cent last week, adding more than $38-billion (U.S.) to the combined value of the companies. The metals are rebounding from a slump in 2015, when excess supplies and little investor interest spurred annual declines.

"The big driver for this move is a bit of a reversal in the macroeconomic picture," said Maria Smirnova, a portfolio manager at Sprott Asset Management in Toronto, which oversees $8.5-billion (Canadian). "All of a sudden, the Fed is acting dovish, growth seems to be slowing all around the world, interest rates are falling all around the world. It's a risk-off trade right now where people are buying gold and other metals."

Money managers boosted their combined net-long holdings across gold, silver and copper by 69 per cent to 40,729 contracts in the week ended Feb. 2, according to Commodity Futures Trading Commission data released three days later. Just two weeks earlier, the funds were wagering on declines, with a net-short position of 16,487. Gold climbed 3.7 per cent last week to $1,157.70 (U.S.) an ounce in New York, while copper rose 1.7 per cent.

The Bloomberg Dollar Spot Index retreated last week by the most since March. A weaker U.S. currency makes commodities attractive as stores of value. At the same time, looser monetary policy from central banks makes metals more competitive against other assets that pay interest. It also signals lower credit costs for producers. The Bank of Japan in late January unexpectedly pushed interest rates below zero, and the European Central Bank has signalled it's prepared to boost stimulus. Investors are placing the odds of a U.S. rate increase this year at just 53 per cent, down from 91 per cent a month ago.

Gold is one of the biggest benefactors of the economic slowdown because it's also sought after as a safe-haven asset. Prices are up 9.2 per cent in 2016. Since the start of the year, investors added $2.4-billion to exchange-traded funds linked to precious metals, according to data compiled by Bloomberg. That follows a withdrawal of $2.7-billion in 2015, when bullion posted a third straight annual loss. The metal is "in the process of bottoming out," analysts at Merrill Lynch wrote in a Feb. 5 report.

"We've been coming back to gold," Jeff Sica, who helps oversee $1.5-billion as founder and president of Circle Squared Alternative Investments in Morristown, N.J., said in a telephone interview. There is "a greater likelihood, especially lately, of more economic turmoil not only here, but in Europe," he said.

Still, the gains may not last in the long-term. Analysts at Jefferies LLC and Investec PLC predict the rally for mining shares will come to an end because supply gluts will keep prices low. Continued weakness in the economy in China, the world's largest metals consumer, could also weigh on demand. At the same time, Société Générale SA expects resilience in the U.S. economy to keep a lid on gold. Copper in January touched the lowest since 2009, while gold reached a five-year low in December.

Gold and copper had been "oversold," said Walter (Bucky) Hellwig, who helps manage $17-billion as senior vice president at BB&T Wealth Management in Birmingham, Ala. While weakness in China and low inflation will limit advances, prices may rally for the time being in "a short-term reversal in trend," he said.

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