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Copper Trade Remains Skeptical

COPPER

Even though copper prices have tracked in positive territory for most of this week, the inability to hold gains after another round of Chinese stimulus highlights a trade remaining skeptical of the Chinese economy and Chinese copper demand. In fact, this week LME copper warehouse stocks have posted consistent and material declines and that should have underpinned copper prices well above this week’s low. The International Copper Association of India announced that copper demand jumped 16% in the country this year on the back of a rise in the production of consumer goods such as automobiles, and the huge jump in construction across the country. In bearish longer-term supply news this week, there are reports that Indonesia released a plan to boost its copper exports next year. In bullish shorter-term supply news, Codelco workers are threatening to strike if the company carries out job cuts as feared.

copper pipe pile

GOLD / SILVER

In retrospect, action in gold this week has been very impressive as the market has held its ground in the face of periodic and significant outside market headwinds from the flow of periodic higher treasury yields and a consistently strong dollar which might have shifted back into an uptrend. However, the Middle East flight to quality factor remains in place and with US airstrikes in Syria, residual fear of the launch of a ground war, possible terrorist attacks inside Israel or signs that the Palestinians get military aid from Arab.  Unfortunately for the bull camp in silver, the market is not tracking tightly with the flight to quality theme and instead is likely to correlate with equities in today’s trade.

 

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