By Jim Williams
Investors are probably thankful Thanksgiving week is behind us. Copper took a big hit in the aftermath of an OPEC meeting on Thanksgiving Thursday that saw crude oil drop 10 percent. Copper fell right along with it – dropping 3.1 percent on Friday, the fifth straight day of losses for the red metal, which is down 13 percent this year.
Copper bounced back slightly on Monday from its lowest since mid-2010 as investors bought back positions after recent losses based on weak economic data and a government report showed manufacturing in November expanded faster than analysts expected in the US, the world’s second-biggest consumer of copper.
On the Comex in New York, copper futures for March delivery jumped 1.8 percent to $2.898 a pound. That is the biggest gain for a most-active contract since the middle of September. The rebound comes after the price of copper dipped to $2.775 on Friday, the lowest since June 9, 2010.
Demand Is Weak
“On the demand side, things aren’t looking great,” says National Australia Bank in Melbourne analyst James Glenn. “People’s read on the Chinese stimulus has been a bit mixed. It doesn’t seem like there’s a lot to support copper prices at the moment.”
The Chinese government may be concerned about the current trend commodity prices. The state-owned Assets Supervision and Administration Commission in China ordered companies under its regulation to manage any expected losses in their commodity trading businesses. This may be a signal that China will not be an aggressive buyer of commodities for the short term. If this is the case, the price of copper could fall much further.
Manufacturing activity growth in China was almost non-existent in November, according to data by the National Bureau of Statistics. The Chinese manufacturing PMI fell to 50.3 last month from 50.8 in October, trailing projections for a drop to 50.5.
There was a moderate increase in total new business but new export growth slowed for a second consecutive month.
In addition to sluggish growth in China, the European economies continue to weaken, while only the US economy is chugging along. Goldman Sachs expects the supply gap to reach 2 million tons in 2018.
FXStreet.com’s Morning Market Watch posted expectations for copper prices in 2015 to range from Southern Copper predicting $3.00 per pound, UBS at $2.90 and Morningstar at $2.67.
As usual, we will keep our ear to the ground to see if we can keep track of the every changing copper landscape.
Is There A Doctor in the House?
You may have heard people say they can forecast the weather based on pain in their knee. But, have you ever heard the theory that copper can predict which way the stock market will go?
Alex Rosenberg from CNBC talks about “Doctor Copper” in his article on CNBC.com. Click here to read the entire story.
Additional Reading
Is Copper the Next Commodity Shoe to Drop?