HardAssetsInvestor

June 14, 2012

Copper Bulls Shouldn’t Worry About China, Prices Consolidating Before Next Big Move

Details

We examine the latest developments in the copper market.

Like most other commodities, copper prices fared poorly in the month of May, as the industrial metal wiped out all of the year’s gains amid escalating global economic concerns. Since the start of June, however, price action in copper has been much more muted, with prices trading in a narrow range between $3.25/lb and $3.40.

COPPER

The $3.25 mark is a technical support level, but copper is vulnerable to another leg lower to the key $3 area, depending on the evolution of the global economic outlook.

Currently, three major concerns are weighing on copper (and essentially all risk assets): the sovereign debt crisis in the eurozone, U.S. recession fears and Chinese growth concerns. The escalating eurozone sovereign debt crisis has the potential to drag down growth in every country, and thus holds great importance.

Copper traders will be closely watching Greece’s parliamentary elections this weekend and yields on Spanish bonds, which peaked at a record 7 percent for the 10-year bond earlier today.

SPANISH 10-YEAR BOND YIELD

While data in the U.S. have been soft recently, the world’s largest economy is widely regarded as being on much firmer footing than its trading partners in Europe, and the Federal Reserve has expressed willingness to provide stimulus should the need arise.