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A Tipping Point? December 27th, 2019 by John Gross

Too early to tell, but it looks like copper’s stars may be coming into alignment.

A few points to ponder –

  • Copper closed at $ 2.8365 on Friday, marking its 4th consecutive weekly gain, and taking Big Red to an eight month high.
  • After hitting a low of $2.47 in September, copper has risen 37¢ or 15% since then.
  • The month started with Dec / Mar at a 1.80¢ contango, which diminished to just 5 points on the 13th, before going into a backwardation that widened to 1.55¢ on the 26th.
  • A backwardation indicates tightness in the market.
  • Inventories of copper held in Comex, LME and Shanghai warehouses fell to 305,791 mt last week, a five year low, and are down nearly 600,000 mt from 900,000 mt in March 2018.
  • The month to date average price of Spot copper stands at $2.77, up 12¢ from November. More importantly though, December is the first time this year that the monthly average is higher than the year ago period.
  • According to The International Copper Study Group, the global refined copper market was in a deficit of 393,000 mt during the first nine months of 2019. This is 63,000 mt deeper into the red from 330,000 during the comparable 2018 period.
  • Our index of copper mining share prices has been outperforming the price of copper as the attached chart illustrates.
  • The ICE U.S. $ Index fell below a key support line; the Euro is testing overhead resistance, and the 2 & 10 year Treasury yield spread is widening.
  • Trade issues, we are all told, are moving in the right direction; most economies around the world are growing, albeit slowly, interest rates remain low – very low by historical standards, and the need for copper will continue to grow.

Of course there is much that can go wrong with this optimistic scenario as we have learned more than a few times over the past eighteen months – but perhaps this time the evidence is leading us in the right direction.

And with that, we say –

All The Best To You and Your Families For A Happy, Healthy, and Prosperous New Year,
John


View Charts (PDF)

View Copper Miners vs Comex (PDF)