Weekly Commodities Wrap

Aluminium Longs At Record Highs

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Copper: Industry Executives Expecting Higher Prices

Copper prices rose this week despite boosted by weakness in the US Dollar in response to a weaker-than-expected ISM non-manufacturing print. In a note released this week, BMI Research suggested that the recent 43-day strike at the Escondida mine had less of an effect on the nation’s copper output than originally thought, forecasting the Chilean copper sector to return to growth by 2018.

Copper industry executives met in Chile this week for a review of the copper market. The headlines of the meeting are that executives feel the decline in copper prices is over and the copper business is now recovering from crisis mode.

However, Chilean mining minister Aurora Williams warned that “it’s very premature to anticipate a new cycle of high prices”.  Chairman of Codelco, the world’s second-largest copper producer, said that most in the market expected copper prices to converge around $3 per pound over the next two to three years.

Arnaud Soirat of Rio Tinto commented that “Copper’s long-term fundamentals are quite positive” noting that he expects to see further demand growth from emerging markets. There are further demand expectations linked to Trump’s proposed infrastructure expenditure however many also fear that Trump’s protectionist stance could hurt global trade.

The rebound in copper prices this week has taken price back up to test the key resistance level formed at the 2016 highs. Despite an initial break of the level at the start of the year copper has since failed to get back above this key pivot. A further break of this level should pave the way for a run up to test the next key resistance at the bearish trend line from 2011 highs and the 2015 swing high.

Aluminium: Longs At Fresh Record Highs

Aluminium prices continued higher this week. The latest positioning data shows that money managers increased their bullish exposure to fresh 2017 highs. With price continuing higher, trend following managers are likely to increase their exposure.

Remaining short positions also suggest the risk of a short-covering rally in price. Increasing tightness in available inventories as well as strong physical premiums, supported by robust demand from money managers, is likely to keep aluminium prices supported. The trend remains firmly bullish in aluminium which is only likely to see occasional shallow retracements lower on profit taking.

The rally in aluminium has seen price move up to challenge key resistance at the 2014 and mid-2015 lows. This is a key level for Aluminium and a sustained break here suggests a reversal of the bearish trend from 2011.  Key support comes in at the mid-2016 highs around 2.786

Platinum: Goldman Sachs Forecast “Space Mining”

Platinum prices tracked the weakness in gold this week as the FOMC minutes confirmed that the Fed remain on course for at least two further rate hikes this year. Of particular note this week was a report released by Goldman Sachs claiming that platinum could “realistically” be mined from asteroids.

The bank noted that while the psychological barrier to mining in space is high, the actual financial and technological barriers are low.  The report suggests that platinum-grabbing spacecraft could be developed to extract the precious metal from space rocks, with even small asteroids potentially yielding $40 billion worth of platinum. The amount of fresh supply would significantly weigh on platinum prices.

The technical picture in platinum points to further downside. Still, in a bearish trend from 2011 highs price has potentially formed a head and shoulders pattern over the last year. A break of the local support low around the 900 level should trigger fresh downside with a break of the 2016 low needed to confirm a continuation of the bearish trend.

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