What message are copper prices sending – down more than 19% in the past two months since the four and a half year high on June 7?
That was after a fall of 3% on the LME last week to around $US6,091 a tonne and 1.4% on Comex in the US after a 0.7% rise on Friday to $US2.764 a pound.
Year to date the copper price is down more than 19% as well and more and more analysts are saying there is a message in this fall – beware.
LME three months copper closed around $US6, 091 a tonne on Friday – down from the four and a half year high on June 7 of $US7, 348 a tonne. The Comex price is down by a similar amount – from $US3.3195 on June 8 to $US2.764 a pound on Friday.
Not even the usual worries about production and industrial disputes in the huge Chilean industry have managed to halt the steady slide in prices.
The coming week will see an escalation contract negotiations at the huge Escondida mine in Chile owned by BHP and Rio Tinto.
The union has given the owners until tonight, our time, to improve a wage offer or the path towards a strike will be set by the union. There has already been contract problems at other Chilean mines.
Another factor advanced for the slide has been the collapse of a a key position in copper held by a big Chinese based investor or investors. That has now ended and been mostly sold off – adding to pressure on the weakening price.
But the Financial Times pointed out last week “That is going beyond just one Chilean strike being deferred or a Chinese investor club breaking up.
“The metal is giving western investors a clear signal to sell risk assets or at least reduce their portfolio weighting…. Right now the copper price is saying we are not far from a more general sell-off in risk assets.”
But complicating that view is that gold prices actually hit year lows last week after the World Gold Council reported that demand had fallen for a second quarter in the three months to June as investment demand slowed.
So gold which is normally reactive to times of stress, is not showing any sign of the stress signals being sent by the sinking copper price.
While Comex gold ended higher on Friday after the US July jobs report, it still lost 0.8% for the week.
December gold rose $US3.10, or nearly 0.3%, to settle at $US1,223.20 an ounce.
That was the fourth straight weekly loss for the metal. September silver added 7.7 cents, or 0.5%, to $US15.462 an ounce—down 0.2% for the week.
Global oil prices suffered another weekly loss, extending its string of weekly losses to four out of the past five – the most for a year.
In New York West Texas Intermediate fell 0.3% over the week, settling at $US68.49 a barrel.
In Europe October Brent crude the global benchmark, fell 0.3%, to $US73.21 a barrel for a weekly loss of around 2.1%, according to FactSet data. That was after rising 1.6% the week before.
That leaves it in the red for the fifth week in a row for the first time since August 2017.
The drop came after another surprise gain in US crude stocks, with stockpiles rising 3.8 million barrels on rising imports,
US crude prices has also been rattled by the simmering trade tensions between the US and China, which escalated further on Friday with China’s threat of new tariffs on $US60 billion worth of American goods.That was after Donald Trump said he would lift tariffs on $US250 billion of Chinese imports to 25%.
In addition to the weekly rise in US crude inventories, prices have come under pressure due to an uptick in production from OPEC members as well as Russia.Russian crude and condensate production “increased sharply” in July by 150,000 barrels a day month-on-month, analysts said, while OPEC output rose by around 300,000 barrels a day last month.
July output from OPEC rose 340,000 barrels to 32.66 million barrels a day in July from a month earlier, including new member the Republic of Congo, according to a survey conducted by S&P Global Platts released Friday. Saudi output was at 10.63 million barrels a day, near to its record high of 10.66 million, the survey showed.
Oil prices failed to get a boost after data from services group Baker Hughes said there was a fall of 2 rigs in the number of active US oil rigs last week to 859. That followed an increase of 3 rigs a week earlier. The total active US rig count, which includes oil and natural-gas rigs, also fell – by 4 to 1,044.
