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Navigating The Bermuda Triangle... December 6th, 2019 by John Gross

That’s pretty much the way it felt last week.

The trade war widened, as President Trump proposed new tariffs on goods from France; duties on steel and aluminum from Brazil and Argentina, and also suggested that he “liked the idea of waiting until after the election” to reach a deal with China.

As might be expected, equity markets around the world were less than pleased with these developments, and clearly said so as they fell sharply.

Last week also saw the largest IPO ever, as shares of Saudi Aramco, the world’s largest oil company were sold to investors.

Coincidentally, while oil prices came under pressure the week before last, on fears of oversupply, the whole thing reversed in the last few days as OPEC and friends agreed to cut oil output in an effort to support prices.

Thus, we saw WTI crude oil close at a six month high of $59.20 on Friday, on its way to testing $60. We remain concerned about the potential of higher energy prices ahead.

Metals were all over the map in response to these events, but copper was in a world of its own.

Monday and Tuesday saw Big Red pull back 3.40¢, with Tuesday posting a low print of $2.6205 in the active March contract.

Wednesday also saw March fall to $2.6205, but that was it, thereby creating a short term double bottom, and contributing to a 3.60¢ advance by the close that day.

But, the big, really big news came with Friday’s unexpectedly strong jobs report that sent equity markets around the world skyward, and helped propel copper 6.25¢ higher, with Spot closing at $2.71, to reach a five month high.

We would like to think that low and falling inventories also contributed to rising prices, and if you take a look at the copper price & inventory chart, we see the weekly low closing price occurring in August at $2.53, coinciding with the recent high watermark of inventories at 532,500 mt, also in August.

Since then, copper stocks have fallen some 190,000 mt, or 36% to just 342,862 mt last week, representing the lowest reading since January.

And if that were not enough to help copper along, Reuters reports that China’s imports of refined metal, anode, and semis rose 12.1% during November from October, to a 14 month high, while imports of concentrates were up 12.7% from October, and +27% from last November.

So, while trade issues and concerns about global economic growth have held copper back, perhaps we have finally come to that point where the fundamentals, coupled with positive technical considerations will enable the market to break from the grip of negative sentiment.


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