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New Year, Same Copper?

New Year, Same Copper?

When we last were together copper had fallen 1% and was waiting for a presidential summit and decision by the Fed to see which way the red metal would trend to end the year. Fast forward to today, the first full week of 2019, and the price of copper is still waiting to see what happens between the U.S. and China, all eyes are on the Fed and now we can add a government shutdown to the mix.

A meeting between leaders of the U.S. and China at the beginning of December sparked optimism for the potential of a trade deal in the coming year as the two sides agreed to a 90-day window of no new protectionist measures as they attempt to reach common ground on a trade agreement.

“Expect a continuation of price volatility in the industrial commodities in 2019,” predicts Andrew Hecht of Seeking Alpha. “The dollar, trade issues with China, and global economic growth will determine the path of least resistance for the commodities in this sector over the first quarter of 2019.”

“A trade agreement between the U.S. and China would be bullish for the sector as it would spur global economic growth, which is the mother’s milk of infrastructure building around the world,” continues Hecht. “If the administration and the new Democratic majority in the House of Representatives can come together in a bipartisan effort on a piece of infrastructure-rebuilding legislation, it would provide additional demand for the sector which could bolster prices. However, the current environment of political divisiveness makes that scenario unlikely in 2019.”

Copper opened this morning at $2.64 a pound. Click on the chart below for up-to-the-minute pricing.

Looking Ahead

This week investors will get an update on the outlook for monetary policy from Wednesday’s December Federal Reserve meeting minutes and a speech by Fed Chairman Jerome Powell on Thursday.

Last month, the Federal Open Market Committee voted to increase interest rates for a fourth time in 2018 and indicated that two more rate hikes are likely in 2019.

This week’s Fed movement may not be too much of a surprise thanks to remarks by Chairman Powell last Friday where he pledged that the central bank will be watching how the economy performs this year and will adjust policy accordingly.

“As always, there is no preset path for policy,” Powell said. “And particularly with muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.”

Investors around the world will be waiting to see what impact this week’s Fed activity has on the market. Here in the U.S., we will keep a close watch on inflation data set to be released Friday.

Here is a look at significant events likely to affect the markets this week as put together by Investing.com.

Monday, January 7

The euro zone is to release data on retail sales.

The Institute of Supply Management is to publish its non-manufacturing index.

Tuesday, January 8

Australia is to report on trade figures.

In the euro zone, Germany is to publish data on industrial production.

Canada and the U.S. are both scheduled to release trade figures.

Wednesday, January 9

The euro zone is to release its latest unemployment figures.

The Bank of Canada is to announce its latest interest rate decision and publish a rate statement. The announcement is to be followed by a press conference.

The Federal Reserve is to publish the minutes of its December meeting.

Thursday, January 10

The European Central Bank is to publish the minutes of its December policy meeting.

The U.S. is to release the weekly report on initial jobless claims.

Fed Chairman Jerome Powell is to deliver a speech at The Economic Club of Washington.

Other Fed speakers making appearances on Thursday include St. Louis Fed President James Bullard and Chicago Fed head Charles Evans.

Friday, January 11

Australia is to release data on retail sales.

The UK is to publish reports on GDP growth and manufacturing production.

The U.S. is to round up the week with what will be closely watched inflation data.

Further Reading

Could there be a copper wipeout? Check out this Seeking Alpha Article to see why that might just happen in the not too distant future.

Will we see the red metal at $7,000 per ton again?

Copper MMI Drops as Chilean Production Reaches Historic High

Mount Polley mine to suspend operations due to sagging copper prices

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Jim Williams

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