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Copper Prices Stay Near 3-Day Highs


Despite some negative Chinese real estate press coverage overnight and mixed to negative global sentiment, copper prices have remained near yesterday’s 3-day highs and seem to have found value around the $3.80 level. Unfortunately for the bull camp, LME copper warehouse stocks posted another inflow of 1,125 tons and the dollar has recovered from initial overnight weakness. While the copper trade is likely to be underpinned by the latest effort to support the Chinese property sector, overnight press reports rekindled some concern the supportive moves will not alter a negative situation in Chinese housing and property sectors. While the copper trade has become confident in chasing prices higher because of the latest Chinese stimulus packages, we suggest traders remain skeptical of the ability of China to quickly spark life into its economy. In fact, Chinese economic data later this week will be a key test of the status of the Chinese economy and to Chinese copper demand prospects. However, it should be noted that the Chinese central bank is looking into bulk dollar purchases/sales of the yuan by Chinese companies perhaps because they see that activity as a possible force behind their ceaselessly declining currency. 

copper pipes various sizes


At least to start the Tuesday US trade, outside market influences of the dollar and US treasury rates narrowly favor the bull camp. However, gold and silver are not embracing noted support from outside  markets recently and that might be the result of residual global inflation readings keeping a measure of rate hike prospects in place. In fact, Spain overnight registered a hot +0.5% monthly wholesale price reading and there are concerns that tomorrow’s US CPI report will match expectations of a gain of 0.5%. Not surprisingly, gold ETF holdings saw a 7th straight decline yesterday while silver ETF holdings posted a significant inflow of 1.7 million ounces. However, in an isolated incident of solid demand for gold, reports this week indicate Japanese gold prices continue to rise with the metal currently 18% higher than in January as traders and investors in Japan buy gold because of attractive gold/Yen pricing. We suspect some traders are now moving to the sidelines ahead of the US CPI report Wednesday, which in  our opinion is likely to be bearish. 


While the fundamental condition in platinum has not changed from the prior 7 trading days, the October Platinum contract appears to have found some value and, in the process, has built a consolidation low support zone. It is a shallow victory for the bull camp to see the market merely avoid a fresh lower low for the move yesterday and for the first avoidance of a lower low in 7 days. However, there are serious supply problems in South Africa and if the World Platinum Investment Council is correct, demand will progressively exceed supply sending the platinum market back into a series of annual deficits. Similarly, the palladium market remains out of speculative favor and remains out of physical and industrial demand favor because of expensive pricing at the end of last year resulted in substitution.


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