In the most recent Copper Journal, I said metal prices moved higher because they were deeply oversold, and that the dollar had come off a bit. Well, that argument was short lived, as the dollar rose last week while copper fell back again, and is in danger of testing recent lows.
Indeed, the dials on our copper dashboard have moved from “yellow – caution” to “orange - be very careful before it is too late.” That is to say, if we take out the recent low of $2.6245, then we are potentially looking into the abyss of still lower prices.
And it’s here we visit the point of departure between logic, and everything else that drives markets. As a point of reference, copper inventories held in exchange warehouses, ostensibly representing the surplus or deficit in global market conditions stood at a five-year high of 901,818 metric tons on March 30, 2018, with the Spot price on Comex closing that day at $3.0190.
This past Friday, inventories stood at 576,782 metric tons and Comex copper closed the week at $2.6490. Thus, inventories fell 325,036 metric tons, or 36%, and the price fell 37¢, or 12%, and bringing us closer to bear market territory. There is no easy explanation for this economic injustice, but it does serve to remind us there are tools available to help manage and mitigate price risk exposure.
John Gross is publisher of The Copper Journal. If you would like to learn more about profitably managing your wire and cable inventory, hedging strategies or gaining additional insight into metals pricing, email John by clicking here or calling him at 631-824-6486.