Copper Falls to New Low

COPPER

Copper has had a rough start to the month, as it closed lower for the third straight day on Friday and fell to a new four-week low overnight. Friday also marked the second straight weekly decline. The negative shift in global risk sentiment following the strong US jobs report on Friday and the strong recovery in the dollar have made it difficult for copper to find its footing, much less regain upside momentum. While the bear camp might be right in its assumptions that the lack of positive Chinese Covid news could be bad news, that question has yet to be decided. Despite a massive, 86,542-tonne jump in Shanghai stocks last week, world stocks are near their lowest levels since 2014. LME copper stocks have fallen in 17 of the last 18 sessions and have reached their lowest level this century. Operations at Peru’s Las Bambas mine have been halted due to protests, which could help underpin prices today.

GOLD / SILVER

Gold was higher overnight despite a stronger dollar, as Friday’s selloff appears to have attracted some buyers. The jobs report on Friday came in much stronger than expected, which stoked fears that the long-awaited Fed pivot could be put off. This sparked a rally in the dollar and steep declines in gold and silver. Prior to the report, a trend of moderating inflation measures had prompted expectations that the Fed would end its rising rate policy soon. But Friday’s jobs report showed a much larger increase in payrolls for January than expected and the US unemployment rate falling to its lowest level since 1969. A key reversal in April gold on Thursday had suggested at least a temporary top was in place, and the jobs report on Friday offered a fundamental basis for selling. However, the long-term implications for gold are still bullish. The selloff on Friday seems to have attracted some bargain hunting, and gold bulls are hoping that Friday’s jobs report will not push the Fed’s benchmark target much above the current forecast 5%. Tax cuts on precious metals encouraged people to stock up on bullion as a safe asset. This data was through November. The fundamental picture leans bullish, with strong a trend of central bank and investor buying, but the market had gotten overbought prior to Friday.

PALLADIUM / PLATINUM

March palladium traded to a new contract low overnight, while April platinum saw a modest recovery after Friday’s steep selloff. Like gold and silver, the PGMs have felt pressure from the surprisingly strong jobs report on Friday, but unlike gold and silver, neither of these markets were in an uptrend, and neither had reached overbought status prior to the selloff. Gold’s fundamental support stems from central bank and investor buying. For the PGMs, strong economic data should be supportive unless the market fears the Fed will get in the way. The jobs report suggests the Fed could turn more aggressive, but the moderating inflationary data could temper that tendency. Impala Platinum PGM output fell 9% year on year during the second half of 2022, as power cuts and a furnace rebuild hit smelter operations. This underscores the challenges that South African mines are facing. The bulls should have been buoyed by last week’s news that US light vehicle sales in January reached their highest level since May 2021.

Interested in more futures markets?  Explore our Market Dashboards here.