Of course, you and I are not the only ones watching the copper price refuse to bust one way or the other nominally (or in relation to gold). It really is an epic macro decision point for we top-down macro propeller heads.
The article (Mining.com) explains some of the dynamics in play with China economic concerns on one side and once again falling warehouse stocks on the other. It ends thusly, and I agree that this year-long phase of indecision is a calm before a storm, whether inflationary lightning or a deflationary blizzard (okay well, that is hype, but work with me).
Calm before the storm?
While LME inventory trickles away, the copper price seems blithely unconcerned.
LME three-month metal continues to oscillate sideways in a $9,500-$10,100 range. Time-spreads are constrained. There is still a premium for cash metal but as of Monday’s close it was valued at a modest $29.25 per tonne.
The lack of action has seen speculators depart for hotter markets both in China and the rest of the world.
Funds remain marginally net long of the CME copper contract to the tune of 19,256 contracts as of the most recent Commitments of Traders Report. Bearish short positions have barely changed over recent months with the net positioning reflecting only small changes in bullish bets.
Everyone, it seems, is waiting for the copper price to make up its mind which way to break out of an increasingly stifling range.
A deteriorating macro picture, first and foremost in China, where manufacturing output growth is in danger of stalling, is why most analysts are looking for lower prices this year.
But the clockwork cancellations are keeping the bears at bay and the longer they continue, the greater is the potential for Doctor Copper’s snoozing to be rudely interrupted.
As a side note, the seasonal average goes positive right about now and lasts into May. It’s a 30 year average obviously with much potential for variation. But it is a factor to consider.
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