The SPDR S&P Metals and Mining (ETF) ($XME) has had an excellent run this year. Year-to-date, $XME is up more than 42%. But as the U.S. dollar has strengthened lately, XME has seen a pullback.
XME rallied earlier in the year as commodities rebounded sharply. One of the biggest gainers earlier in the year was iron ore. Iron ore jumped to above $70 per ton but those gains were driven more by speculation than fundamentals. Speculative trading in steel and iron ore in China on a massive scale led to a surge in prices. As Chinese policymakers brought in stringent requirements over the past month, trading activity has reduced and so have prices.
Indeed, the fundamentals of the metal & mining sector remain weak. To add to this, the U.S. dollar has been gaining strength. I believe it is time now to take profit.