Tin and the Dollar: A Curious Relationship

When I first introduced this comparison chart of tin prices (inverted) versus the Dollar Index here back in June 2021, I noted that “The US Dollar Index is headed for a multi-month uptrend, if you can believe the message from tin prices.” That chart prediction worked out pretty well over the months since then, with the Dollar Index up more than 6% following that article.

What is curious is that, since then, tin prices have broken their normal correlation with the Dollar Index and kept on rising, shown here as a falling chart plot on the inverted scaling. This is not regular behavior, but it has happened before.

Sometimes tin prices and the dollar get into a positive correlation, shown as inversions in this chart, and when that happens it has always been followed by a meaningful drop for the dollar. I do not have a good explanation for why it should work that way, but it is a pretty consistent phenomenon. Tin prices have gotten pretty extended in the months since the COVID Crash and are ripe for a reversal, which should trigger the inverted reversal in this chart for the Dollar Index. But exactly when tin and the dollar should start those reversals is not something this curious relationship will tell us. 

There is another curious relationship involving tin prices that has bearing on this current situation. There are 550 warehouses at 32 locations across the USA, Europe and Asia that are approved by the London Metals Exchange for the storage of “LME-registered brands of metal, on behalf of warrant holders.” Storage levels fluctuate with prices, which is normally an inverse relationship. When prices rise, owners pull metal out of storage to use it or sell it. Here is a chart:

A curious thing happens, though, at really important price tops for tin. The inventory levels tend to start upward ahead of the final top for tin prices. We are seeing such a phenomenon right now, suggesting that a turn for prices is coming soon. Unfortunately, this is again a “condition”, not a signal, so it won’t tell us the exact moment of the turn.