Do you, wary yet possibly intrigued reader, know how difficult it is to stay out of copper?
Every Monday morning meeting since May 10's "The FT's Natural Resource Editor Directs Our Attention Toward Copper and Peas":
U.S. copper is up again, +12.95 cents (+2.73%) at 4.8780 and I think we will be getting off the train for a bit. Between a Barron's story on Friday and ZeroHedge relaying a call for a double over the weekend the inherent leverage in the futures bears watching.
One of the reasons we prefer futures to equities—actually there are a few but—is that very same leverage on your initial margin.In the case of copper it is 16:1, meaning a 1% move in the contract, say from $3.99 where we thought the stars had aligned, a 1% move is 16% on your invested cash for a directional bet.
Thus the 22% upmove in the futures translates to 357% cash-on-cash.
And because it works both ways you can find out very quickly how dangerous this little game is. A 10 cent drop from current levels whacks your initial margin for 33%. This is why directional speculators almost always end up becoming trend-followers. For non-commercials commodities are for tradin' not investin'.
That was followed by "President Biden says unemployed offered jobs must take them or lose benefits"
He went on to say that Climateer's stepping off the copper train earlier in the day was pretty darn lucky.*
*currently 4.7080 -0.0405
See the high candle in early May in the chart below?
That's May 10. And see that thin little line at the top of the candle? That's us. Top-tick hour of the top tick day. You only get one of those per lifetime.
So every Monday meeting since goes something like this:
"Is it time? Should we be back in copper?"
"Not yet"
"Should we be short copper?"
"I don't know, maybe a little."
And now, with the red stuff down twenty cents on the morning?
Not yet.
From Mining.com, June 14, 2021 | 10:00 pm:
Copper prices dropped on Tuesday to their lowest since April 26, weighed down by investor fears over measures Chinese authorities could take to curb a recent price rally in commodities.
Copper for delivery in July was down 1% from Monday’s settlement price to $4.35 per pound ($9,570 per tonne) early Tuesday afternoon on the Comex market in New York.
The most-traded July copper contract on the Shanghai Futures Exchange hit its lowest since April 23 at 69,500 yuan ($10,852.08) a tonne.
*****
China’s state planner last week renewed its pledge to step up monitoring of commodity prices, as domestic producer inflation hit its highest in more than 12 years.
Market talks expected China to release state reserves of copper, aluminum, and zinc while also possibly trim long positions and crackdown price speculative activities.
Higher copper prices are the only way to spur output of the metal for electric vehicles, Trafigura Group CEO Jeremy Weir said Tuesday at the FT Commodities Summit.
“If you want to electrify, we are going to need more copper,” Weir said. “And higher prices are the only solution.”
Commodities coolingThe possibility that the US Federal Reserve will soon start to slow the pace of emergency asset purchases is also bolstering the outlook for the dollar, shaking a pillar of support for copper and other commodities that have been boosted by the currency’s weakness over the past year....
....MORE
Front futures 4.3350 down 0.1920 last
Not yet.
