Comex High Grade Copper Futures Analysis – July 8, 2013

September High Grade Copper is trading a little better this morning following Friday’s sharp sell-off. Oversold conditions are most likely the reason for today’s firm trade. Other technical factors may be contributing to the early support since the market is testing a short-term retracement area.

Late last week, the market dropped sharply following the release of the U.S. Non-Farm Payrolls report. The Labor Department reported a gain of 195,000 jobs versus economist guesses of 165,000. Interest rates rose on the news since it probably means the Fed will soon begin tapering its aggressive bond-buying program. Higher interest rates make the U.S. Dollar a more attractive investment, driving down demand for commodities such as copper that are priced in dollars.

Besides the U.S. Dollar, investors are also watching the Chinese economy since China accounts for about 40% of the world’s copper demand. A slowdown in the Chinese economy could lead to a drop in demand for copper.

Technically, the main trend is down on the daily chart. A move through 3.1790 will turn the main trend to up while a trade through 2.9855 will mean a resumption of the downtrend.

Daily September High Grade Copper
Daily September High Grade Copper

Currently, the main range is 2.9855 to 3.1790. This range has formed a retracement zone at 3.0823 to 3.0594. This morning, the market is straddling this zone, meaning the market is balanced.

Uptrending Gann angle support is at 3.0655. This is followed by another Gann angle at 3.0255. On the upside, the nearest resistance is 3.1925. This angle is not expected to be tested.

Without any major fundamental reports today, the market could trade sideways. A lot of the action will depend on the movement in the U.S. Dollar Index. A strong dollar could pressure prices while a weaker dollar could encourage profit-taking or short-covering following last week’s sharp sell-off. 

Do We Taper & When – Gold Traders Want To Know

Do We Taper & When - Gold Traders Want To Know
Do We Taper & When - Gold Traders Want To Know
Last week, gold and silver prices continued their downtrend even though metals had started the week on a positive note. Their fall coincided with the weakness of leading currencies such as euro and the Aussie that depreciated against the stronger USD during last week. Following the release of the U.S non-farm payroll report, in which 195k jobs were added, more investors now believe that the Fed may taper QE3 in September or December 2013; this will slow down the growth of U.S money base and consequentially further lower the demand for gold and silver as safe haven investments. The next FOMC meeting scheduled for the end of the month will shed some light on this issue. Moreover, during last week, ECB and BOE left their respective cash rates unchanged. The ECB president and BOE governor hinted that they may keep rates low or slash them in the coming months. These headlines were enough to pull down the euro and pound against the USD. This week’s key event for metals will be Wednesday’s double whammy, with Fed Chairman Bernanke speaking and the release of FOMC minutes from its June meeting. This morning gold has added a few dollars to trade at 1219.26 as traders are buying on the cheap after gold tumbled to recent lows. Silver is following in the shadow of gold adding 62 pips to trade at 18.79. Silver got an extra bump by stronger US data, which helps increase the demand for the industrial metals.

Based on upcoming events and latest developments, gold and silver prices might further fall this week after Wednesday events. The sharp decline of both gold and silver prices at the end of the week might lead to a correction at the beginning of the week, but the general downward trend may persist. The upcoming publication of the FOMC meeting and Bernanke’s speech could affect precious metals markets if either of these events could shed some light on the Fed’s future plans. I suspect the upcoming minutes won’t stir up the markets since many wait for the September or end of the year FOMC meeting, in which the Fed may decide to taper QE3. Until then, the ongoing developments in the U.S economy could influence traders as to the future plans of the Fed.

Base metal futures are seen trading down this week, as release of upbeat US non-farm payrolls data has raised fear in the market that the Federal Reserve might taper its bond purchase program soon.

The rise in the dollar index after encouraging US data is also expected to build downward pressure on base metals. Copper futures extended their earlier losses on Friday, falling by more than 2% after a better-than-expected reading on the U.S. labor market. Copper is sensitive to shifts in the economic outlook because of its widespread use in many industries. A stronger U.S. economy could spur the Federal Reserve to curb its stimulus. The central bank’s easy-money programs have supported prices of copper and other commodities. Copper is trading at 3.0811 adding 11 pips this morning. Copper futures had traded at about $3.10 a pound ahead of the report. Prices slumped early on Friday, catching up with Thursday’s losses in other copper markets

Comex High Grade Copper Futures Analysis – July 5, 2013

September High Grade Copper futures fell sharply on Friday following the release of the U.S. Non-Farm Payrolls report. The June jobs data showed the economy added 195,000 new jobs. This was better than the pre-report guesses of 165,000. The unemployment rate remained unchanged at 7.6%.

The strong jobs report led to speculation the Fed was now closer to winding down its aggressive monthly bond-buying stimulus program. This helped drive up interest rates, making the dollar a more attractive investment. Since copper is priced in dollars, demand may fall since it may be too expensive to foreign buyers.

Another concern for investors is the slowing Chinese economy. The recent performance of the economy suggests demand from the world’s second largest copper buyer may decline. This would put additional pressure on copper prices.

Daily September High Grade Copper
Daily September High Grade Copper

Technically, the main trend is down. The new main top is 3.1790. A trade through this price will turn the main trend to up. There may not be an acceleration to the upside however because of retracement zone resistance at 3.1990 to 3.2494.

On the downside, the market found support on an uptrending Gann angle at 3.0555. A break through this level could trigger a further decline to another Gann angle at 3.0205 then eventually the main bottom at 2.9855.

The fundamentals seem to support further downside action while the technical chart pattern suggests selling short-term retracements until the main trend turns back up. It looks as if rising interest rates are here to stay likely underpinning the U.S. Dollar. This should keep the pressure on copper prices. Traders should continue to follow the developments in China to see if the economy is still weakening. 

Gold and Silver Diverge On Strong Economic Data

gold 2 bnsEconomic numbers gave investors some reason for optimism this week. Jobs numbers were mostly better than expected, yet a weak manufacturing report raised concerns about economic growth. U.S. markets were closed Thursday in observance of Independence Day. Traders are now preparing for the marquee event of the week, the US nonfarm payroll release. On Thursday the ECB and BoE statements kept markets hoping. Traders can never know what to exactly expect from central bankers. Both banks held rates and policy but sent the market volatility meter climbing with their statements. As we ease into today’s data release the US dollar is continuing to climb toward recent highs touching 84.15 while the euro is weak at 1.29. Gold closed down on Thursday and is off in the Asian session this morning trading at $1243.25 down by $8.65

Investors liked what they saw in the job numbers, mostly from the ADP’s monthly figure on private-sector payrolls. These figures came in above expectations. First-time unemployment claims came in slightly below forecasts. Still, investors are waiting for the big jobs numbers due out Friday. Economists surveyed predict the U.S. economy added 155,000 jobs and the unemployment rate fell to 7.5% in June.

Today’s report is important not just for its view into labor markets, but also as a guide to Federal Reserve policy. The Fed, however, will not ignore events going on overseas. A negative change in the global economic outlook or in financial markets could stop the Fed from discussing an exit from the bond buying program.  The importance of the global economy on the U.S. recovery was evident in the latest trade numbers. The U.S. trade deficit unexpectedly widened in May. The global slowdown cut into U.S. exports and the relatively healthy U.S. consumer sector brought in more imports. Depending on June data, foreign trade may have subtracted a half-percentage point from second-quarter economic growth that was already looking meager before the trade numbers were released. The payrolls report is the biggest market-mover on the economic calendar. This time, though, the report may share the spotlight with global turmoil.

The slump in gold prices has hit the European Central Bank where it hurts: its balance sheet. The consolidated balance sheet of the ECB and its 17 member central banks plunged at the end of last week as a result of a revaluation of gold prices, data provided by the ECB showed Wednesday. The regular quarterly revaluation meant that the Eurosystem’s gold holdings fell 115 billion euros.

Gold prices are likely to come under pressure on spot and futures market on Friday as the global markets await US jobs data later in the night. In between, movements in the currency market could play a minor role in the price swings. Indications are that the US data may show that more jobs were added, signaling that the economy is improving. That could eventually lead to the US Fed Reserve scale back monetary stimulus.

Silver is trading at 19.293 against the strong US dollar, supported by the strong recovery in the US as demand for metals continues to increase, along with better than expected PMI data from around the globe. Base metals are expected to go down as continued weakness in Chinese economy and caution ahead of US payroll data can put pressure on prices. Copper is trading at 3.117 down by 34 pips this morning after strong gains throughout the week.

 

Comex High Grade Copper Futures Analysis – July 3, 2013

September High Grade Copper Futures rose despite concerns about Friday’s U.S. Non-Farm Payrolls report, China’s weakening economy, and political/economic concerns in the Euro Zone.

The U.S. Non-Farm Payrolls report on Friday could set the tone for the rest of the month. Investors will be watching this report closely because employment is one of the major components the Fed will use to make its decision on whether to begin tapering its asset buying program.

If the Fed decides to reduce the amount of stimulus, then interest rates should rise, making the U.S. Dollar a more attractive investment. This is likely to put downside pressure on copper.

Daily September High Grade Copper
Daily September High Grade Copper

China is important to watch because the country accounts for at least 40% of the world’s demand for copper. A slowdown in its economy will likely mean a drop in demand. This would increase supply and lower prices.

Finally, the Euro Zone also accounts for a large amount of demand. If economic problems flare up again in the region then governments may tighten spending further, causing a drop in demand for copper. Earlier this week, political uncertainty in Portugal pressured the Euro because it often leads to economic problems especially if new leadership doesn’t agree with current austerity issues.

Greece was also in the news on concerns about debt. The country is in the process of privatizing its debt and reforming its private sector. Both processes have stalled, prompting the country to consider more reforms that could further weaken the economy.

Technically, September High Grade Copper rallied after attempts to hold prices lower failed. With prices technically oversold on the daily chart, it seemed like just a matter of time before the buying would overcome the selling. After forming a closing price reversal bottom at 2.9855, a huge rally was launched when traders took out 3.0915.

This type of chart formation typically leads to a quick 2 to 3 day rally of at least 50% of the last break. Based on the main range of 3.4125 to 2.9855, the next upside target is 3.1990 to 3.2494. A rally into this zone should attract fresh selling pressure.

This week’s rally has helped to alleviate some of the selling pressure. A strong jobs report on Friday will likely mean the renewal of the recent selling pressure especially since the market has retraced nearly 50% of the last break. 

Reduced Commodity Trading Indicates Dire Days Ahead

I’m the first to admit that the economy is faring much better than it was a few years ago—back when America entered into the Great Recession. Manufacturing is continuing to grow in the United States, and even though that’s at a slow pace, pundits seem impressed with the growth.

But if the U.S. and global economy are on the mend, then why is there actually a decline in the prices of those commodities used when economies are growing?

You would think that commodity prices should be stabilizing and showing signs of edging higher if the global economy was expanding—but they are not.

The price of spot gold is down 36% from its peak.

Silver, used in electronics and industrial goods, has fared even worse, plummeting 61% from its peak.

Oil, the fuel driving the supposed economic recovery, is down 28% from its peak a few years ago.

Copper, used in the housing, electronics, and industrial markets, is down a whopping 65% from its peak.

Those numbers don’t lie.

The widely cited catchword “supercycle,” used to describe the superlative run-up in commodity prices over the past decade, appears to be fading.

Just take a look at the chart featured below. The prices of gold, silver, copper, and oil peaked in early 2011, and have since all been in a decline. This price action doesn’t indicate a recovery.

Reduced Commodity Trading Indicates Dire Days Ahead
Reduced Commodity Trading Indicates Dire Days Ahead

Chart courtesy of www.StockCharts.com

The fact is that even if the media doesn’t talk about it, the great price moves we have witnessed in the commodities may be a thing of the past

The growth of China and the global economy was a major reason why the demand for commodities surged, as was the superlative growth in India, Eastern Europe, Latin America, and Asia.

But while China is now showing fractures in its economic foundation, the pundits are still expecting double-digit growth and a can’t-miss economy for years to come.

However, the growth isn’t happening. The decline in commodity prices is a telltale red flag that the global economy may actually be in a decline and stalling, rather than growing the way pundits are saying.

The dire situation in the eurozone is also an example of the state of the global economy

So, if you attest to the possibility of a slowing global economy, you know that businesses will also see their revenues and earnings fall.

The muted growth in U.S. corporate revenue growth is another red flag

That means companies from the financials to the industrials could face slowing in the years ahead, especially those with exposure to the global economy such as Alcoa Inc. (NYSE/AA), NIKE, Inc. (NYSE/NKE), and Exxon Mobil Corporation (NYSE/XOM), just to name a few.

This article Reduced Commodity Trading Indicates Dire Days Ahead was originally published at Investment Contrarians

 

Comex High Grade Copper Futures Analysis – July 2, 2013

September High Grade Copper futures posted an inside move. This was expected because of Monday’s expanded session. Volume was down as many traders chose to stand on the sidelines ahead of Wednesday’s shortened trading session and Thursday’s U.S. market holiday.

Oversold conditions and position squaring ahead of Friday’s U.S. Non-Farm Payrolls report may have been the reasons for Monday’s expanded range day. Uncertainty over whether the Fed is poised to begin reducing its asset purchasing program continues to make investors nervous. Traders want to know dates, but the Fed remains ambiguous as to its future plans.

Daily September High Grade Copper
Daily September High Grade Copper

Without the Fed’s guidance, the copper market is likely to remain range bound over the near-term. Things could open up on Friday if the U.S. jobs data report misses the mark. Analysts are looking for an increase of 165,000 jobs.

A number lower than this will indicate the economy is still sluggish, this is likely to mean the Fed will refrain from making any changes to the size of its stimulus. A number greater than 165,000 is likely to encourage the Fed to take action as early as September.

Technically, the main trend is up, but the market is in a position to rally further. The main trend turns up when 3.4125. is violated. The current chart pattern suggests that 3.1990 is a potential target. On the downside, support comes in 3.0855. 

Dismal U.S. Consumer Spending to Drag Us Back into Recession?

Dismal U.S. Consumer Spending to Drag Us Back into Recession?
Dismal U.S. Consumer Spending to Drag Us Back into Recession?
While the mainstream economists were quick to believe that the U.S. economy is growing as the key stock indices suggest, I stood by my opinion that it isn’t.

After the first estimates of gross domestic product (GDP) for the U.S. economy came out, a wave of optimism struck and stock markets rallied. It seemed as if everything was headed in the right direction.

Sadly, they were wrong.

In its third and final revision of GDP, the Bureau of Economic Analysis (BEA) reported that the U.S. economy grew at just 1.8% in the first quarter of 2013 from the fourth quarter of 2012—that is 25% lower than its previous (second) estimates, when the BEA said the U.S. economy grew 2.4%, and 28% lower from its first estimate of 2.5%. (Source: Bureau of Economic Analysis, June 26, 2013.)

The primary reasons behind the decline in GDP growth are that domestic consumer spending and exports from the U.S. declined.

Going forward, I see continued dismal consumer spending in the U.S. economy. There’s no rocket science behind my reasoning, just one simple economic concept. Economics 101: when interest rates increase, consumer spending declines, because it costs the consumer more to borrow, so they step back from buying.

Remember: consumer spending is the backbone of any growth in the U.S. economy. If it decreases, our economic growth becomes questionable.

What we have seen in the past few weeks are skyrocketing yields on U.S. bonds—suggesting long-term interest rates are rising. The effects of this will eventually trickle down to places where consumers in the U.S. economy borrow to buy. One example of this type of place is the automobile sector.

Consider this: car and light truck sales are on path to increase beyond 15 million units this year in the U.S. economy—in 2009, they stood at 10.4 million. (Source: Wall Street Journal, June 26, 2013.) Will consumer spending on cars be the same if interest rates on car loans start to increase? I doubt it.

And there’s another threat to consumer spending—unemployment. In May, there were 1,301 mass layoffs in the U.S. economy, involving 127,821 workers, an increase of 8.5% over April. (Source: Bureau of Labor Statistics, June 21, 2013.) When a person is unemployed, their spending is down and large credit purchases like cars are unlikely.

If consumer spending in the U.S. economy continues to struggle, it will start to show up in the corporate earnings of companies on key stock indices that are currently able to buy back their own shares and cut expenses to make their numbers appear better. Looking at the prospects of anemic consumer spending in the U.S., I remain skeptical. The optimism I see now is based on nothing but hope. Once the hangover from easy money goes away, I wouldn’t be surprised to see U.S. GDP numbers turn negative. Yes, that means back to recession.

Michael’s Personal Notes:

The indicators of global economy are yelling economic slowdown ahead, but they are being ignored.

Consider the chart below of the S&P GSCI Industrial Metals Index:

GSCI Industrial Metals Index Chart

Chart courtesy of www.StockCharts.com

This index tracks the price of industrial metals like copper, zinc, aluminum, nickel, and lead. The S&P GSCI Industrial Metals Index continuously declining suggests these metals aren’t being used as much—factories are not operating at their full potential in the global economy.

The reality is that the demand in the global economy is slowing down. According to Deutsche Bank and Macquarie Group, between 2013 and 2015, copper supplies are expected to exceed the demand by an average of about 500,000 metric tons a year. (Source: Wall Street Journal, June 25, 2013.)

The economic slowdown in the eurozone is still taking a toll on the global economy. Unfortunately, I think there’s more to come as the bigger nations in the common currency region—Germany and France—are showing signs of stress.

China, the powerhouse of the global economy, is witnessing an economic slowdown like never before. In 2012, the country performed poorly, and this year, it’s expected to do the same. China’s exports are hurting, manufacturing is struggling, and the amount of credit is becoming troublesome.

As I have been harping on about in these pages for some time now, the implications the economic slowdown in the global economy could have on the U.S. economy are very vast. We are not an island nation, immune to the troubles in the global economy. We trade with other nations.

Unfortunately, as the demand declines in the global economy, U.S. companies will suffer. They will be selling less. As a matter of fact; the first-quarter 2013 revised gross domestic product (GDP) reported by the Bureau of Economic Analysis (BEA) showed that exports from the U.S. economy actually declined. In the first quarter, real exports—adjusted for price changes—decreased 1.1%. In the fourth quarter of 2012, exports declined 2.8%. (Source: Bureau of Economic Analysis, June 26, 2013.)

As the economic slowdown continues to take a stronger grip on the global economy, I wouldn’t be surprised to see U.S. exports decline even further. Looking at the economic conditions worldwide, I don’t hold a view that suggests there’s prosperity ahead anytime soon—we have a long way to go. My advice: don’t believe the key stock indices; they are far beyond reality, and they’re doing a masterful job at luring in even more investors.

Don’t Ignore the Indicators of the Impending Economic Slowdown

The indicators of global economy are yelling economic slowdown ahead, but they are being ignored.

Consider the chart below of the S&P GSCI Industrial Metals Index:

Don’t Ignore the Indicators of the Impending Economic Slowdown
Don’t Ignore the Indicators of the Impending Economic Slowdown

Chart courtesy of www.StockCharts.com

This index tracks the price of industrial metals like copper, zinc, aluminum, nickel, and lead. The S&P GSCI Industrial Metals Index continuously declining suggests these metals aren’t being used as much—factories are not operating at their full potential in the global economy.

The reality is that the demand in the global economy is slowing down. According to Deutsche Bank and Macquarie Group, between 2013 and 2015, copper supplies are expected to exceed the demand by an average of about 500,000 metric tons a year. (Source: Wall Street Journal, June 25, 2013.)

The economic slowdown in the eurozone is still taking a toll on the global economy. Unfortunately, I think there’s more to come as the bigger nations in the common currency region—Germany and France—are showing signs of stress.

China, the powerhouse of the global economy, is witnessing an economic slowdown like never before. In 2012, the country performed poorly, and this year, it’s expected to do the same. China’s exports are hurting, manufacturing is struggling, and the amount of credit is becoming troublesome.

As I have been harping on about in these pages for some time now, the implications the economic slowdown in the global economy could have on the U.S. economy are very vast. We are not an island nation, immune to the troubles in the global economy. We trade with other nations.

Unfortunately, as the demand declines in the global economy, U.S. companies will suffer. They will be selling less. As a matter of fact; the first-quarter 2013 revised gross domestic product (GDP) reported by the Bureau of Economic Analysis (BEA) showed that exports from the U.S. economy actually declined. In the first quarter, real exports—adjusted for price changes—decreased 1.1%. In the fourth quarter of 2012, exports declined 2.8%. (Source: Bureau of Economic Analysis, June 26, 2013.)

As the economic slowdown continues to take a stronger grip on the global economy, I wouldn’t be surprised to see U.S. exports decline even further. Looking at the economic conditions worldwide, I don’t hold a view that suggests there’s prosperity ahead anytime soon—we have a long way to go. My advice: don’t believe the key stock indices; they are far beyond reality, and they’re doing a masterful job at luring in even more investors.

Comex High Grade Copper Futures Analysis – July 1, 2013

September High Grade Copper futures soared over 3% on Monday as manufacturing data from Europe and the U.S. calmed worries about demand.

Upbeat Euro-Zone manufacturing activity helped set the tone for the day. The report showed contraction in the region manufacturing activity had declined to its slowest pace in 16 months. This underpinned the market, setting it up for a further rally.

China’s manufacturing activity was mixed. The official manufacturing PMI data was basically in line with expectations at 50.1, but the HSBC manufacturing PMI, fell to 48.2 in June from 49.2 in May. The market held steady, probably because investors were expecting worse data.

Daily September High Grade Copper
Daily September High Grade Copper

The Institute for Supply Management’s manufacturing purchasing managers’ index rose to 50.9 in June from 49 in May. This beat estimates of 50, fueling hopes of a U.S. economic recovery.

Technically, after forming a four-day support base, September Copper finally broke out to the upside. The sideways action was indicating impending volatility and traders accommodated with a volatile surge to the upside.

Not only did the move confirm the closing price reversal bottom at 2.9855, but it also took out a long-term Gann angle with conviction. The angle, dropping at a rate of .02 per day since the June 5 top at 3.4125 had controlled the short-term direction of the market for almost a month.

With the reversal bottom confirmed, the market is now in a position to complete the countertrend rally with a move to a 50% level at 3.1990. If upside momentum can continue through this price level then look for a test of the downtrending Gann angle at 3.2325. New support is at 3.0655.  

Comex High Grade Copper Futures Analysis – June 28, 2013

September High Grade Copper futures rallied on Friday but speculators couldn’t trigger an upside breakout and short-sellers refused to budge. With prices at their lowest levels in almost three years, it seems like just a matter of time before the buying will overcome the selling.

Bullish traders are waiting for some clarity from the Fed. Since June 19, the market has dropped considerably on the thought the central bank would begin tapering. Some traders had built in a September start date. Late in the week, a few Fed officials said investors had it all wrong. They claimed the Fed is not watching a calendar, but rather economic growth. This helped put in the bottom and stabilize prices.

Also helping the market bottom was a comment from a People’s Bank of China official. At the start of the week, the Chinese money markets were in disarray. Some traders felt it was on the brink of a credit crisis. Since China demands about 40% of the world’s copper, many traders believed demand would fall off and priced the market accordingly. A central bank official then calmed the markets by stating that the situation was under control and that “reasonable rates” would be attained.

Daily September High Grade Copper
Daily September High Grade Copper

So now that prices have stopped falling and the markets have stabilized, traders are looking for a catalyst to drive prices higher. The technical picture looks friendly but it is going to take an event to force short sellers out of the market. This event may be an economic report or another comment from a Fed official.

The base being built in copper is either going to lead to a strong counter-trend move or a continuation of the trend. If the market believes the Fed will refrain from making any changes in its stimulus program, then look for a breakout to the upside. If traders believe the Fed will begin tapering its stimulus as early as September, then look for a resumption of the downtrend.

There is nothing in the chart pattern which suggests an impending change in trend, but the current chart pattern indicates the market could be ripe for a solid retracement rally back to at least 3.1990. A lot depends on whether the market can sustain a move through the downtrending Gann angle at 3.0725.

The closing price reversal bottom at 2.9855 is helping to hold the market in place, but the buying has to overcome the selling or something has to happen to encourage the stubborn shorts to begin covering their positions. 

Crude Oil Prices Out Of Sync With Fundamentals

Oil 1 BNSWTI crude oil gained 8 cents on Friday to $97.13 a barrel, ending the quarter down 10 cents but up $5.31 from the close of 2012. On Friday, oil came under pressure from the stronger dollar as investors resumed pricing in the possibility that the Federal Reserve will begin to pare back its bond-buying program as soon as its September policy meeting. This morning oil is tumbling to trade at 96.18 as traders look closely at the fundamentals of supply and demand.

There is nothing including geopolitical tensions to support oil at this price, as speculators continue to push prices upwards on the back of positive economic data from the US. The other side of this argument is the Fed’s reduction in its asset purchases. Neither of these arguments supports prices above the 97.00 price level.

Positive data from Japan, which indicates that “Abeconomic” is working well, turning around the economic situation, with the Japanese Tankan release this morning reporting above expectations and last week’s long list of data releases showing success due to the aggressive monetary stimulus program of the Bank of Japan, might support the BoJ to add additional stimulus, which could support oil prices. On the other hand is data from China over the past month which shows a slowdown in the recovery of the world’s number two user of crude oil. Last week the government revised downward 2013 growth estimates to 7.5% from 7.7%. This morning Chinese PMI data was mixed, with the HSBC private report showed a decline in manufacturing and also reported below the 50 divider line, while the official government release reported slightly higher above the 50 number, but traders pay more attention to the HSBC report. New orders from abroad shrank in June for the third month in a row and at a rate that was the fastest since September as foreign clients, particularly those in Europe and the United States, cut demand for Chinese goods even after China’s producers passed on savings from lower material costs and discounted charges, HSBC said.

Crude oil futures are likely to witness some downward correction due to profit booking in the coming week after trading mostly firm in last few sessions, Benchmark crude oil contract on the New York Mercantile Exchange rose over 4% during the week to a high of $97.82 per barrel Friday. NYMEX oil prices gained due to release of upbeat economic data from the US that boosted hopes regarding improved oil demand, US consumer spending in May grew 0.3%, in line with market expectation. Besides, US weekly jobless claims fell by 9,000 to 346,000 in week ended Jun 22, while pending home sales hit a six-year high in May. Economic data from the US is crucial for the market, as it is the world’s major oil consuming nation. Other fundamentals for crude oil are not very supportive, as the weekly oil inventory report by the US Energy Information Administration showed a sharp rise in petrol stocks in the week ended Jun 21.

Natural gas continued to tumble as the month drew to a close, but rebounded a few pip on Monday morning, to trade at 3.597 well off its high just a month ago at the $4.40 level. Natural gas futures are continuously moving higher and in a swing pattern, forming higher‐highs and higher lows. But in last couple of months prices have just consolidated and indicated signs on correction. As summer sets in, the weather has not been hot enough to send residential use higher but inventories remain at their peak leaving natural gas demand lower and pulling down prices.

 

Gold, Silver & Copper All Climb To Start Off The New Month

Gold, Silver & Copper All Climb To Start Off The New Month
Gold, Silver & Copper All Climb To Start Off The New Month
Gold climbed more than 2 percent on Friday on end-of-quarter short-covering, but the precious metal still posted its largest quarterly loss in at least 45 years due to selling amid fears the U.S. Federal Reserve may wind down its stimulus program. Some investors aggressively bought back their bearish bets on fears gold could rebound, while others squared their books on the last trading day of a dismal second quarter after Thursday’s 2 percent drop. Gold ended up balancing Thursday and Friday’s trading and closing at $1223. This morning gold is climbing, adding $16.75 to trade at 1240.

This week is likely to be crucial for gold prices on the back of economic releases from the US and Europe, also open interest in COMEX gold has declined while volumes have increased, which indicates investors are short selling combined with the RBA meeting scheduled for Tuesday and the ECB meeting on Thursday.

The week is starting off focusing on Chinese data. China’s state-owned mining company has said mining production is expected to increase in the coming quarter, which would increase the supply of gold in line with the current demand. The Purchasing Managers’ Index (PMI) for June retreated to 48.2, the lowest level since September 2012 and down from May’s final reading of 49.2. It was in line with a preliminary reading of 48.3 released on June 20. A reading below 50 indicates a contraction of activities while one above shows expansion. The government’s official PMI report which is often at odds with the HSBC report was less dour. It showed the index slipping to 50.1 in June from 50.8 in May, but still holding above the 50-point threshold that indicates growth.

Hedge funds and other large speculators this week cut their bet on higher gold prices to the lowest level in almost six years, according to data released Friday by the Commodity Futures Trading Commission. Gold prices fell 23% during the three months ended in June, the biggest decline since the U.S. gold futures trading began in the 1970s.  

Many of the reasons to hold gold have evaporated, traders and analysts said. The U.S. economy is improving, and inflation hasn’t materialized after the Federal Reserve’s stimulus efforts. Europe’s banking system has stabilized.

Copper and the London Metal Exchange Index of six primary metals headed for the biggest quarterly declines since September 2011 amid as signs of slowing in China and uncertainty about the future of stimulus in the U.S. Metal for delivery in three months on the LME dropped as much as 1.3 percent to $6,660.50 a metric ton and was at $6,753.50. Silver is trading at 19.675 climbing nicely after being trapped in the upper $18 price late last week. Silver has gained over 20 cents this morning along with copper which is trading at 3.068 up 10 points.

 

Traders Dump Gold At Record Rates

Traders Dump Gold At Record Rates
Traders Dump Gold At Record Rates
This morning gold did the unthinkable and fell below the support line at the 1200 price to trade at 1199.25 giving up $12.35 in the Asian session. Gold fell to its lowest since August 2010 and is on track to record its worst quarter since at least 1968 on persistent worries over the US Federal Reserve’s plan to wind down its monetary stimulus. Bullion has taken a beating since the beginning of last week – down 15 per cent or over $200 an ounce – after Fed Chairman Ben Bernanke laid out a strategy to wind down the bank’s $85 billion monthly bond purchases on the back of a recovering economy.

US Federal Reserve Chairman has said that any pruning of the $85-billion monthly program to boost economy will depend on various economic parameters that will emerge in the next few months. However, the emerging data could lead to whetting down of the stimulus package. The recovery of gold by over $12 means Asia finds value in buying at current levels. But there should be little doubt that the bears have their grips firm on the precious metal and it could take a while before they loosen. If US GDP numbers have held promise to stop gold from falling on Thursday, the jobs data have given a stick to nay-sayers to beat gold.  The question is how long physical buying can continue, particularly in the face of investors and hedge funds fleeing the yellow metal. The lower prices have failed to boost physical demand in Asia, traditionally the biggest buyer of gold, and investors have continued to flee exchange-traded gold funds. Gold futures extended its decline below $1,200 per ounce in late electronic trade on Thursday, as soothing talks from Federal Reserve officials boosted other markets, but failed to stem a stampede out of gold. Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 969.5 tons, as on June 27. Silver holdings of ishares silver trust, the largest ETF backed by the metal, increased to 9,905.88 tons, as on June 27. Investors are shedding the commodity in record numbers. ETF have witnesses one of their busiest days in recent history.

The ICE dollar index, which measures the US unit against six other major currencies, swung to slight gains and losses all day. The index fell slightly to 82.901 in recent trade compared with 82.964 on late Wednesday. This morning the dollar is trading well into the 83.00 price level at 83.11. The stronger the US Dollar the weaker gold. Today’s economic calendar releases will not be important enough to move the commodity or currency markets, with the marquee event being the Michigan Consumer Confidence report due later in the day. With the month drawing to its close gold will show the largest monthly drop in recent times.

Silver has diverged from gold this morning gaining over 19 cents to trade at 18.748 as investors take advantage of the low price to buy up on the cheap. Also assurances from the People’s Bank of China helped give industrial metals a boost. Copper is trading flat this morning also at 3.048. Concerns over a credit crunch and economic growth in China also weighed on investors. China’s central bank is squeezing funds out of the money market, forcing banks to borrow money at historic interest rate levels. This morning the PBOC said that it would make sure that credit is available to the banks, this is a move to rein in the famous “shadow” banks.

Comex High Grade Copper Futures Analysis – June 27, 2013

September High Grade Copper futures are forming a support base and could be ripe for a breakout to the upside. After experiencing a prolonged sell-off from the June 5 top at 3.4125, the market has stabilized this week, even posting a potentially bullish closing price reversal bottom at 2.9855 on June 25.

The key to the breakout will be sustaining a move through a downtrending Gann angle at 3.0925. Not only will a move through this level confirm the reversal bottom, but it will also put the market on the bullish side of a downtrending angle that has controlled the direction of the market for 16 trading days.

The current range is 3.4125 to 2.9855. A sustained break out could trigger an eventual move into the retracement zone created by this range. This zone at 3.1990 to 3.2494 is the main upside target.

Fundamentally, the market has stabilized since China decided to fix its credit crisis problem. Earlier in the week, investors were questioning its potential impact on demand which accounts for almost 40 percent of global copper consumption.

Daily September High Grade Copper
Daily September High Grade Copper

Also providing some support is the perception that U.S. and Euro Zone central banks will not rush into curtailing their current stimulus programs. Earlier on Thursday, the New York Federal Reserve President actually surprised traders by stating that investors were “out of sync” with the economy and the Fed. This may have been a clue that the Fed is in no hurry to begin tapering its aggressive stimulus program.

The thought of the Fed holding off from making any changes is helping to pressure interest rates and appears to be the catalyst behind the latest rally in the stock indices. The more investors begin to believe the Fed will wait to make any changes to its stimulus package, the greater the chance of a near-term rally in copper.

It is suggested that short traders bring down protective stops or begin lightening up at current levels. Counter-trend traders and bottom-pickers may begin to big up activity if stocks and bonds continue to rise. A drop in the dollar should also make copper more attractive to foreign traders. 

Metals Recover A Bit On Bargain Shopping

Metals Recover A Bit On A Weaker USD
Metals Recover A Bit On A Weaker USD

Gold prices recovered some of their losses after U.S. first quarter economic growth was revised lower. Gold is trading at 1235.25 gaining $5.45 this morning. The US’s gross domestic product, the broadest measure of all goods and services produced in the economy, grew at a 1.8% annual rate between January and March, the Commerce Department said Wednesday. This was less than earlier readings and below the 2.4% gain forecast by economists.

Gold yesterday dropped sharply and hit 3-year lows, on growing expectations that the US Federal Reserve will slow the pace of economic stimulus later this year and continued liquidation from ETF’s.  Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 969.5 tons, as on June 26.

Silver holdings of ishares silver trust, the largest ETF backed by the metal, increased to 9,890.87 tons, as on June 26. The US dollar index, which measures the greenback against six other major currencies, rose to 82.964 from 82.553 on late Tuesday in North America. The dollar index posted its sixth straight session of gains. The USD eased a bit in the Asian session.

Eurozone bonds rose across the board, after European central bankers reassured markets they would keep exceptional monetary policy measures for the foreseeable future. The euro pared some of the losses against the dollar, after final data showed US gross domestic product growth was more tepid than previously estimated in the first quarter, but was held back by a moderate pace of consumer spending, weak business investment and declining exports. The People’s Bank of China said on late Tuesday, it had provided cash to some institutions facing temporary shortages and would continue to do so if needed.

Industrial metals prices slipped yesterday however, recovered some ground on concerns about the outlook for demand from top consumer China as moves by the country’s central bank to ease fears of a credit crunch failed to fully reassure investors. Industrial metals prices are trading higher on international bourses today. Traders can expect a further rise in the prices of metals on account of bargain hunting at lower levels. Silver is trading at 18.733 recovering along with gold this morning as buyers continue to take advantage of low prices.

Copper is trading at 3.057 trading in the green as traders take advantage of the weakened US dollar. The dollar declined by a few pips making low priced commodities a special appealing. Copper closed lower on the London Metal Exchange yesterday, weighed by concerns over Chinese metals demand and a weaker-than expected reading on U.S. economic growth.

Comex High Grade Copper Futures Analysis – June 26, 2013

September High Grade Copper futures weakened after an attempted upside breakout failed to draw the attention of new buyers. The market did, however, manage to close positive for the session. After falling sharply from the June 5 top at 3.4125, the market has managed to form a compressed support base over the past four days. This is actually healthy since a good base is necessary to reverse the current downtrend.

Fundamentally there are still concerns about demand from China. Traders are concerned that a slowdown in the Chinese economy will lead to a drop in demand for copper. Also weighing on trader sentiment is the money market problems in China. Although a People’s Bank of China official said the central bank is trying to establish reasonable rates, some traders are still approaching the long side with caution. No one wants to get caught by a new wave of fresh selling.

Daily September High Grade Copper
Daily September High Grade Copper

Today’s soft U.S. GDP data may force the Fed to wait before tapering its asset buying program. This could be bullish news because it would pressure the dollar, making copper more attractive to foreign demand.

Technically, the market is in a downtrend, but the current price action suggests a support base may be being built. On Tuesday, the market posted a closing price reversal bottom. If traders can confirm this potentially bullish chart pattern with conviction then look for an acceleration to the upside.

Crossing a downtrending angle at 3.0937 and sustaining the move will be another sign of strength. If shorts begin to cover and bottom-pickers re-emerge, then look for bullish traders to drive this market into the retracement zone at 1.3990 to 3.2494. This is where new short-sellers will be likely waiting. 

Comex High Grade Copper Futures Analysis – June 25, 2013

An easing of tensions caused by credit market problems in China helped give September Copper futures a boost on Tuesday. The market began to move higher and maintained a bullish tone throughout the trading session after a People’s Bank of China official said the central bank will guide rates to a “reasonable range”. This helped alleviate some of the concerns that the crisis was escalating.

The weaker U.S. Dollar also contributed to the rally. However, the market was able to maintain its strength late in the session when the dollar turned higher for the day. This could be a sign that investor sentiment is beginning to shift to the upside.

Daily September High Grade Copper
Daily September High Grade Copper

Technically, the market produced a potentially bullish closing price reversal bottom. This chart pattern typically triggers the start of a 2 to 3 day rally equal to at least 50% of the last major break. Recently, the market broke from 3.4125 to 2.9855, creating a retracement zone at 3.1990 to 3.2494. This zone is the potential upside target.

Since topping at 3.4125 on June 5, the market has walked down a Gann angle moving at a rate of .02 per day. This angle is at 3.1325. Taking out this angle with conviction could trigger the momentum needed to launch the market into the retracement zone.

If the cash crisis in China begins to escalate, then look for a sharply lower trade as this and the possibility the Fed will begin tapering its current asset buying spree are two events that could fuel another sell-off.

 

Bargain Hunters Buy Silver Dump Gold

Bargain Hunters Buy Silver Dump Gold
Bargain Hunters Buy Silver Dump Gold
Gold is trading at 1277.65 while silver is trading at 19.545 this morning. Gold fell in New York as prospects that the Fed Reserve will reduce monetary stimulus curbed demand for the metal as a protection of wealth. Silver also slipped and platinum plunged to the lowest since November 2009. Traders will be closely watching todays slew of US data, which could give direction to the Federal Reserve decision as to when to begin tapering its programs. Traders will see durable goods orders and housing data which are both expected to print higher than forecast. The rest of the trading day should remain quiet and focused on news flow as there is very little data due out before the North American session.

This morning, most of the Asian equity markets are trading on the higher side, barring the Chinese markets which are down more than 4.5% on the back of concerns caused by the credit crunch. The subsequent announcement by the People’s Bank of China that it may not inject liquidity further added to the concerns. The euro is trading flat at 1.3120. The dollar index is also trading flat at 82.45. There are no major economic data releases expected from the euro-zone. However, a string of data releases from the US in the evening such as durable goods orders, the S&P Case Shiller home price index, House price index, consumer confidence index and new home sales are expected to be positive, which may support the dollar index.

Gold futures saw renewed selling pressure on Monday, as global equity markets fell on concerns over tightening credit conditions and growth worries in China. Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 985.73 tons, as on June 24 while silver holdings of ishares silver trust, the largest ETF backed by the metal, increased to 9,881.87 tons, as on June 24. Silver traders are taking advantage of the tumble in prices to buy on the cheap, which is helping to limit losses.

Copper closed at its lowest level in almost three years on the London Metal Exchange Monday as investors cashed out of base metals amid a continuing credit squeeze in top metals consumer China. At the close, LME three-month copper was 2.2% lower on the day at $6,670 a metric ton. The metal earlier tumbled 3.0% to $6,613 a ton, its lowest price since July 2010. Aluminum closed 1.2% lower at $1,771 a ton.

Comex High Grade Copper Futures Analysis – June 24, 2013

September High Grade Copper futures failed to confirm Friday’s closing price reversal bottom, sending the market sharply lower. The lack of follow-through to the upside was a reaction to the news that China was going through a cash crisis. Besides an expected slowdown in demand, investors now have to deal with the possibility of another credit crisis.

Sure it’s a little early to talk about China’s cash problems spreading outside of its boundaries, but investors that went through the credit lock up in 2007 would rather take action first and ask questions later. Although the market took out Friday’s low, it did not close on its low, suggesting that perhaps even short sellers are a little nervous about holding a position in a weak market.

The clash between the potentially bearish fundamentals and the oversold technical conditions could produce volatile trading over the near-term. The inability to drive this market lower into the close coupled with Friday’s reversal bottom are strong signs that there may be a buyer in the market at current price levels.

Daily September High Grade Copper
Daily September High Grade Copper

Without a reversal bottom, traders are going to have to wait for a shift in momentum to trigger the start of a short-covering rally. Taking out today’s high at 3.1000 will be a strong sign that momentum is shifting. This will be an important signal because the market has posted a series of lower-tops and lower-bottom since reaching a top at 3.4125 on June 5. It won’t be until the market takes out a downtrending Gann angle at 3.1525, however, before anyone can get excited about the long side.

This last round of selling pressure was triggered by the possibility the Fed will begin tapering its aggressive bond-buying stimulus program as early as September. This news has driven up interest rates and consequently the U.S. Dollar, making copper more expensive for foreign buyers. Today’s sell-off was triggered by a possible cash crisis in China.

If conditions improve in China, then coupled with oversold conditions, the market may be setting up for a solid short-covering rally.  A bottom in stocks and bonds paired with a top in the dollar may be enough to fuel the start of a decent correction.