Copper prices extend declines on demand indicators

Monday, January 12, 2015

Three month LME copper headed towards a fresh five year low as intraday moves during early morning trading saw the red metal slip to a low of $6,057/tonne. Copper prices have closed lower for the past seven sessions and with prices displaying further weakness early this morning we could see today’s session add to the bear run. Prices closed 2.6% lower last week as a bumpy recovery in the global economy crimps the demand outlook for the metal. Notable slowdowns in the eurozone and China as the former deals with a burgeoning debt crisis and the latter struggles with lacklustre manufacturing activity have seen investors reduce holdings of the metal and with LME warehouse inventories rising almost 6% since the start of the year we could see additional price weakness in the coming sessions.

Chinese stocks headed for the worst losses in almost a year and a half as a third straight session of bearish trading activity overnight saw both the Shanghai Composite and CSI 300 lose between 1-1.7% as investors took profits off the table. Both indices have rallied strongly over the past few months and have been among the best performing equity benchmark indices, adding between 50-60% over the past four months. However, investors have sold holdings in recent sessions as recent data releases have struggled to justify the significant gains with the market correction extending at the start of this week. With investors struggling to find a reason for further upside moves we could see both benchmarks fluctuate around current levels in the lead up to tomorrow’s trade data release.

Gold rallied for a second straight session, briefly trading above $1,231/oz during overnight trading as investors continued to speculate that the Fed would keep the pace of any eventual interest rate rise slow. Haven demand saw the yellow metal rally 1.2% on Friday after briefly consolidating during the latter half of last week as investment demand improved. Weaker than expected US wage data on Friday tainted an otherwise impressive non-farm payrolls and unemployment rate and with caution prevailing among market participants, we could potentially see further upside in the coming sessions on renewed risk aversion.  

LME copper stocks rise on slowing demand outlook, depressing prices

NLSCA Index LME CLS Copper 2015 01 12 07 34 58

Chinese stocks pare recent gains

SHCOMP Index Shanghai Stock Exc 2015 01 12 07 39 35

Spot gold prices rally on haven demand

XAU Curncy Gold Spot Oz D 2015 01 12 07 45 04

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Topics: Copper, Gold, LME
More from: Kash Kamal