Support for Copper Prices

COPPER

Copper followed through on Monday’s late rebound with early strength overnight, and it continues to hold above its 50-day and 100-day moving averages. Chinese officials disappointed the market with today’s “non-announcement” on the Covid Zero policy, but they did announce supportive measures for the property sector, and this has provided some support to copper prices. LME stocks remain close to their recent highs, but they had a mild decline this morning, which has also provided support. The Shanghai Composite had an impressive rebound on Tuesday after a lukewarm start to the week, which suggests that Chinese equities were able to put the weekend unrest behind them once things appeared to calm down. This is also supportive to copper. The Commitments of Traders report showed managed money traders were net sellers of 11,653 contracts of copper for the week ending November 22, reducing their net long to 13,727. Non-commercial & non-reportable traders were net sellers of 8,277, reducing their net long to 5,458. The selling trend is short-term positive.

GOLD / SILVER

The dollar eased a bit overnight as protests in China quieted down and a risk-on mood returned to global markets, and this supported gold and silver. However, the dollar had an outside reversal day higher on Monday, and if it holds it quasi double bottom from November 15 and 29, it could spark a resumption of selling in gold and silver. After a sharp rally off ideas that the Fed would slow its rate hike pace in the coming months, the precious metals bulls may have gotten disappointed with the market’s limited reaction to the weak dollar last week. Jerome Powell speaks on Wednesday, and the trade is looking for him to confirm expectations that the Fed will slow interest rate increases. The markets will be facing several data releases in the next couple of weeks that could drive traders back and forth on the question of whether the Fed will slow its rate hikes or not. This includes US consumer confidence on Tuesday, GDP and Chicago PMI on Wednesday, and the November payrolls report on Friday, which is expected to show a gain of 200,000. Strong numbers would provide rationale for the Fed to keep firm on rate hikes, while weak numbers could encourage talk of slowing down the pace of the increases. The most consequential numbers will probably be PPI and CPI the following weeks, culminating in the FOMC meeting on December 13-14. All this points to volatility ahead as the markets could get pulled back and forth on the slow/won’t slow debates.

PALLADIUM / PLATINUM

Neither palladium nor platinum seem very perturbed by the China Covid flares nor by the protests of the lockdowns, as both markets managed to close higher on Monday and to continue those gains overnight. Perhaps the trade senses that the unrest could encourage the Chinese government to ease the lockdowns, which could boost economic activity and support auto catalyst consumption. There have been reports that the China is quietly loosening its Covid measures. However, December palladium has remained inside Friday’s range, which may not be viewed as a rejection of that day’s low at $1,798.50. This seems to leave the $1,800 area as a key support level. January platinum has been consolidating for several sessions following a $100 break of its November highs. If consolidation means continuation, then the market could be poised to resume its correction of the $274 rally off the September contract low at $801.20. A break below $970.70 would put the next downside target at $937.70. Look for resistance at $1,022.40 and $1,034.60.

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