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Copper Prices On Defensive


Copper prices are on the defensive this week, being pressured by demand concerns. The market posted a heavy loss on Wednesday and is under moderate pressure this morning. A stronger dollar, a sharp drop in Chinese new home prices, and weaker than expected US industrial production readings follow disappointing industrial production results from China and Japan on Tuesday. China has introduced fresh stimulative measures for their property sector over the past week, but they have also had two highest Covid case readings since late April. This could make it difficult for them to continue with the relaxation of their “Zero Covid” policy. LME copper stocks had a modest build today, but large increases on Monday and Tuesday took levels well above the recent lows. This is weighing on prices this week, as it suggests demand is soft.

copper cylinders


The bounce off the spike low in the dollar on Tuesday and renewed expectations of Fed tightening may have the gold and silver bulls concerned this morning. After the euphoria of the recent softer than expected PPI and CPI, traders appear to have moderated their expectations for a Fed pivot, especially after yesterday’s retail sales number came in with its biggest increase in eight months. The dollar put in a spike bottom on Tuesday, and a recovery would leave gold and silver vulnerable to corrections their recent rallies. In a negative short-term development, the Swiss customs agency reports that Swiss gold exports fell to 159.6 tonnes in October from 174.4 in September, an 8.5% decline. Exports to India fell 36% to 22.2 tonnes, and exports to China fell 1% to 43.7 tonnes. Gold supply growth could be slower in 2023, according to loomberg. India’s gold demand could grow 12% in 2022/23 (fiscal year ending in March), according to ICRA . Robust sales in April-June and steady wedding and festival purchases were credited with the increase. With the dollar poised for a recovery, we look for setbacks in gold and silver. Much will hinge on the next FOMC meeting, but that is four weeks away. In the meantime, there are several data points, including another round of CPI and PPI for the market to absorb.


Like gold and silver, the PGMs have set back today as the dollar has strengthened. Both markets may have gotten overdone on the China covid relaxations, and weaker stock markets in Asia overnight may have added to the pressure. Switzerland is a major refining hub, and their palladium exports increased 75% in October to 1,746 kilograms from 995 in September, according to the Swiss customs agency. Platinum exports fell to 1,602 kg from 1,755, a 9% decline. After a $273, 34% rally between September 1 and last Friday, January platinum was due for a correction, and one appears to have begun. The initial target is way down at $969.90, with interim support at $993.30 and resistance at $1050.00. Retracement targets for December palladium come in at $1,978.30 and $1,936.50.


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