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Copper Investors Try to Remain Patient

All eyes, Irish or not, are on the Federal Open Market Committee’s meeting this St. Patrick’s Day. The main focus of the two-day meeting is believed to be on the wording and possible removal of the word patient in the Feds determination of what to do with interest rates. If it is removed, as expected, it could provide the Federal Reserve room to maintain or to increase the federal fund rate during future meetings.

Early morning trading in London showed three-month copper was at $5,845 per ton, down from its opening price by $13. “Investors are worrying that the Federal Reserve may lift interest rates as early as June,” said Xu Yongqi, metals analyst at Guotai Junan Futures in Shanghai.

The uncertainty of the Fed’s decision isn’t the only thing weighing on investors’ minds. A renewed fall in oil prices and a slow recovery from China after last month’s Lunar New Year are also causing caution when it comes to the price of the red metal. The Shanghai Composite Index actually rallied 2.3% to its highest settlement in 5 1/2 years after Chinese premier Li Keqiang said the government would step up efforts to bolster economic growth. Consumption of copper is expected to increase later this year based on China’s investment into it’s national grid, given that power cable is a major use for the conductive metal predicts Chunlan Li of minerals consultancy CRU in Beijing. “We expect the market to tighten up in the second half because demand is going to recover further and supply growth is expected to be lower.”

Regarding oil, crude sits below $54 a barrel – its lowest since early February. “This commodity deflation running through the global economy has resurfaced again, reflecting the ongoing weakness in the global economy,” Robin Bhar, head of metals research at Societe Generale in London was quoted as saying in the Business Recorder. “Investors perhaps are looking to stay short or add to short positions. If one part of the commodity sphere is falling, like oil, then it tends to pressure others such as copper due to basket index selling.”

New contributor Jesse Colombo predicted an oil bust over a year ago in his article 9 Reasons Why Oil Prices May Be Headed For A Bust; his reasons are as follows: 

  1. The unwinding of record speculative bullish bets
  2. The “smart money” is growing increasingly bearish
  3. The global monetary environment is tightening
  4. The shale oil boom is increasing supply
  5. Production is starting up again in many countries
  6. OPEC’s limited ability to boost prices by cutting production
  7. Global oil demand is slowing
  8. The global economic “recovery” is actually another bubble
  9. The ending of the commodities supercycle

We will keep both eyes and ears on the FOMC meeting today and tomorrow and have an update on any movement and what it might mean to the price of copper.

Copper for delivery in three months on the London Metal Exchange was little changed at $5,850 a metric ton ($2.65 a pound) at 9:48 a.m. in Shanghai. Prices fell 0.2 percent to $5,847.50 on Monday, the lowest since March 12.

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