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Copper Update: Giving Thanks to the Housing Market

Copper Update: Giving Thanks to the Housing Market

By Jim Williams

Copper moved slightly higher to start the Thanksgiving week, thanks to falling inventories and an uptick in China’s property prices. Benchmark copper on the London Metal Exchange jumped almost 1% Monday after posting its second weekly decline on Friday.

Reports out this morning show China┬┤s new home prices rose at a slightly faster pace in October after gains had held steady the previous month.

“Housing prices in China were a bit firmer, which is important in copper,” Capital Economics commodities analyst Caroline Bain told Reuters, noting that construction accounts for about half of Chinese copper demand. “I’m slightly wary because rising housing prices (in China) don’t necessarily mean there is going to be a flurry of construction activity, particularly as credit conditions are quite tight.”

The same cannot be said back here in the U.S. where the housing market is booming thanks to continued low interest rates.
Rates are expected to go up one more time before the end of the calendar year and the Federal Reserve has already hinted it will hike rates at least three times in 2018. Despite this trend, the interest rates are expected to remain at historically low levels, therefore, continuing the trend in real estate.

“I believe that demand for commodities will continue to be strong as the attraction of a brand-new home will attract buyers and bolster economic conditions,” states Andrew Hecht, of Seeking Alpha. “Industrial commodities have performed well in 2017, and the prospects for 2018 based on trends in the residential housing market around the U.S. are telling us that 2018 will be another strong year.”

2017 has been a banner year for copper. Even though it has dropped nearly 6% from the three-year highs it hit in late October, copper is still up more than 20% for the year.

In the coming week, investors will be focused on the minutes from tomorrow’s Federal Reserve meeting to further fuel the expected rate hike in December.

Thanks again to www.Investing.com for putting together a list of significant events likely to affect the markets over this holiday ‘shortened’ week.

Tuesday, November 21
The U.S. is to publish a report on existing home sales.
Fed Chair Janet Yellen is to deliver remarks at a panel discussion in New York.
The Reserve Bank of Australia is to publish the minutes of its latest policy setting meeting.
The UK is to release data on public sector borrowing. Later in the day, Bank of England Governor Mark Carney is to appear before the Treasury Select Committee, in London.
Canada is to release data on wholesale sales.

Wednesday, November 22
The U.S. is to release data on durable goods orders and unemployment claims. Later in the day, the Fed is to publish the minutes of its latest policy setting meeting.
The UK government is to announce its annual budget.
New Zealand is to release data on retail sales.

Thursday, November 23 (Happy Thanksgiving!)
Financial markets in the U.S. will be closed for the Thanksgiving holiday.
Financial markets in Japan will be closed for a holiday.
The euro zone is to release data on manufacturing and service sector activity.
The UK is to produce revised data on third quarter economic growth.
The ECB is to publish the minutes of its latest policy setting meeting.
Canada is to report on retail sales.
Swiss National Bank Chairman Thomas Jordan is to speak at an event in Basel.

Friday, November 24
New Zealand is to release data on the trade balance.
The Ifo Institute is to report on German business climate.



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