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A Disorderly Market? December 13th, 2019 by John Gross

As relates to nickel, that’s the way it appears.

Last week, inventories of nickel held in LME warehouses rose 54,342 mt, (worth about $770 million) or nearly 80% to 123,228 mt.

Oddly enough, the price also rose last week, gaining 33¢, or 5.4% to close at $6.42.

And if we go back a bit further in time, the numbers become even more ridiculous.

At the end of September, nickel inventories stood at 157,986 mt. By mid-November they had fallen to 64,566 mt, representing a 93,420 mt, or 60% drawdown.

Over that same period, the price fell $1.17 or 15% from $7.97 to $6.80. Where’s the logic here?

Given the size of the global nickel market – about 2.2 million mt, these changes, and the resulting volatility are absurd, and clearly do not reflect the fundamentals.

More importantly, it is this type of trading activity that causes legitimate hedgers to throw their hands up in despair, disgust and frustration, because at the end of the day, to state the obvious, this is not how the market should be operating.

Have we learned nothing from the financial crisis? Where is the oversight? Where is the referee in this game?

Otherwise, it was a pretty good week for nonferrous and precious metals, as well as energy and equity markets.

Progress in trade talks, coupled with a somewhat softer dollar, and continued support from central banks all contributed to higher prices.

Also, from a technical perspective, to the extent that support lines hold, and / or overhead resistance is challenged, a case can be made for still higher values ahead.

Regards,
John


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