The Shifting Sands of Sentiment July 26th, 2019 by John Gross

Is it any wonder that base metal markets are skittish?

• Brexit takes center stage, again, and as the deadline draws near, the two sides remain far apart
• The Fed is poised to cut interest rates - the first question is why, then by how much – But then what?
• The ECB ponders launching another quantitative easing program, driving negative rates even lower
• Protests continue in Hong Kong, and are becoming more violent
• North Korea does more missile testing
• Iran also conducting missile tests
• Oil tankers in Mideast facing threats
• US dollar rising again – Administration rules out intervention

Against this backdrop of uncertainty, equity markets here reach record highs last week.

Trade issues are, and have been a particular problem on many levels. First it was said, ‘trade wars are easy to win’. A few months ago we were told that a deal was close to being reached. Now it is suggested that we should not expect a trade agreement until sometime in 2020.

In the meantime, the global economy is feeling the pain, as are metal markets.

Copper gave up 7¢ last week, taking Spot back below $2.70.

Over the past three months, copper has moved sideways between $2.60 and $2.80, with a wider range of $2.55 - $3.00 over the past twelve months, as it responds in large part to the ebb and flow of trade talks.

From a more macro view, the ‘higher highs and higher lows’ formation since 2016 remains in effect, and unless or until this pattern is broken, we will expect higher prices when some of the above key issues have been resolved.

Regards,
John

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