4-Day High in Copper

COPPER

Despite disappointing economic views toward the Chinese industrial/construction industry from a major global equipment manufacturer and lingering disappointment from Chinese PMI readings last week, the July copper contract has posted a 4-day high. However, the prospects of a technical low in copper are higher than for a fundamental low in prices following comments from the Komatsu CFO that his company does not see any sign of recovery in China so far this year. The construction and mining machinery company suggested China may have over invested in 2020 resulting in softer demand for equipment in 2021 and 2022. In addition to a triple low around Friday’s low of $3.8250, the copper market holds a net spec and fund short near the highest levels since October and the US nonfarm payroll report Friday should help to cushion sagging global economic expectations. Unfortunately for the bull camp, Chinese data last week was very disappointing and that will increase the importance of Chinese import and export data to be released tonight. While weekly Shanghai copper warehouse stocks declined again and extended a pattern of declines, the magnitude of the outflow was very modest at 2,176 tonnes. Obviously monthly Chinese copper import statistics are one of the most important fundamental reports released in the monthly cycle for copper pricing and without something positive from imports of copper and copper products the $3.80 level could be violated on Tuesday.

GOLD / SILVER

While today’s economic report slate is benign, data in subsequent sessions will likely produce significant reactions in gold and silver with China releasing import and export figures tonight and the US releasing key inflation readings later in the week. Overnight, China apparently raised its gold holdings by 8.09 tons last month, resulting in October through April gold reserve additions of 120 tons. With the big range down failure at the end of last week, the bias in gold is down and to a lesser degree down in silver. Clearly, the strong US nonfarm payroll reading and the downtick in the unemployment rate reduced economic uncertainty interest in gold and at the same time provided a very minimal lift in the US dollar. Even the fundamental side of the equation favors more downside action in gold as Indian buyers are showing signs of high price sensitivity, the World Gold Council posted softer 1st quarter demand readings, and the Chinese economy has failed to show positive traction following the removal of activity restrictions. As in the gold market, the silver market also saw reversal action from last week’s high but the damage on the charts was not as significant as in gold and in retrospect did not appear to damage the charts. We suspect better economic news from the US will provide support to silver as a physical/industrial commodity and think silver ETF investment patterns will remain positive.

PLATINUM / PALLADIUM

We are surprised with the higher trade in platinum this morning given an initial stronger dollar trade and negative Chinese economic comments from a major industrial equipment manufacturer. However, the trade will be presented with Chinese import and export data (including physical commodities) tonight and those readings will likely set the trend for the week in platinum. Expectations call for positive export and import data but data softer than in the prior report. Unfortunately for the bull camp platinum ETF holdings last week declined by 7,448 ounces but remain 6.5% higher year-to-date. Fortunately for the bull camp the July platinum contract from the last COT positioning report mark off has declined $36 likely pulling the net spec and fund long back away from the highest levels in 14 months. With the palladium market holding a net spec and fund short near record levels (adjusted into the low Friday) and palladium ETF holdings last week increasing by 17,202 ounces (holdings are up 10% year-to-date) the market has fundamental and technical justification for this morning’s 6 day high. While the palladium market generally remains out of favor due to the entrenched expectation that platinum prices are set to narrow their premium verses platinum, the market has seemingly found value at the $1400 level. Fortunately for the bull camp the quasi-double low at $1,400 last week coincided with a reversal in short-term bearish technical signals and therefore the market has probably found a low but lacks upside capacity.

Interested in more futures markets?  Explore our Market Dashboards here.