One of the first things they teach you in junior portfolio manager school is: "Don't get crosswise to the market." Meaning, using commodities as an example, don't take opposing positions in vehicles that tend to correlate in their reactions to endogenous variables. An example would be oil and copper, commodities priced in dollars that tend to both move inversely to the strength of the dollar.
Yet that is exactly where we find ourselves: looking for lower copper prices at the same time we are looking for higher oil prices.
We tried to lay out the argument for the former in the outro from September 26's
....At the moment copper and silver prices are being driven (lower) mostly by the strength of the dollar, and to a lesser extent by the unbelievable reality that we have real rates at negative 4 to 5% finally pulling closer to 0%. Supply/demand are currently in approximate balance with the recession coming in U.S. housing and a depression coming in Chinese shelter construction being offset by increased demand for wind turbines and electric vehicles.
These macro forces are why we've been negative on copper's price since $4.40 and continue to think the $3.13 July low will be tested with a real possibility of sub-$3.00 for a while.
Futures $3.2930.
Naturally as soon as I start babbling the futures do one more little dip, to $3.2500 before the dollar gets crushed, the dollar index drops from 114.75 to 110.06, copper reverses to just under $3.60:
And I find myself wondering why am I doing this out in public, naked, and sometimes appearing to make a damn fool of myself?
Still haven't found an answer to that question. Most active (December) futures: 3.3610 last.
Here's Mining.com with the headline story:
Copper prices fell on Tuesday, on worries that China’s determination to stick with its strict covid-19 rules could dampen economic growth and demand for metals.
Copper for delivery in December fell 1.8% on the Comex market in New York, touching $3.35 per pound ($7,379 per tonne).
The most-traded November copper contract on the Shanghai Futures Exchange (ShFE) declined 0.9% to 62,650 yuan ($8,702.60) per tonne.
Chinese President Xi Jinping reiterated the validity of China’s zero-covid policy, which includes lockdowns and movement curbs to prevent the spread of coronavirus, at the Communist Party Congress on Sunday.....
....MORE
And October 17: "Copper price down as demand uncertainty offsets supply woes".
That's what we were talking about a few weeks ago.
