$CU $XAU $USO $OIL $USD $GS $BLK $FCX
“We have all of the Key signs of a Super-cycle, metals marking multi year highs, the weaker USD, Crude Oil reaching $50bbl, and rising global liquidity“– Paul Ebeling
Copper (CU) topped $8,000/ton (3.69/lb) for the 1st time in more than 7 yrs, with Goldman Sachs (NYSE:GS) and BlackRock (NYSE:BLK) pointing to the start of a new long-term Bull market as supply lags an expected demand booms.
The market is seeing the sharpest rally in 10+ yrs, with China’s appetite for commodities and supply snags early on in the Covid-19 chaos lifting copper about 80% from its March lows.
Expectations for a deficit, the weaker USD, and its role in Green tech have also fueled gains. Some banks and investors are now drawing comparisons to the spike in the early 2000’s, when a jump in Chinese orders ushered in the last Super-cycle for commodities.
The surge in prices has been a boon for miners, with shares in copper-producer Freeport-McMoRan (NYSE:FCX) rising to multiyear highs recently. In addition, production costs have been falling, setting the stage for a strong yr for profitability.
Copper rose as much as 1.4% to $8,028/ton the highest price since Y 2013, and was at $7,999.50 (3.69/lb) by 12:50p on the London Metal Exchange (LME) Friday.
Most other metals also gained too, with nickel rising 0.4%. Singapore iron ore futures pushed above $160/ton, hitting the highest mark since trading began in Y 2013.
Analysts are seeing the start of a positive feedback loop between commodities, the USD and emerging-market growth that has driven past structural Bull markets.
At the center is strong, synchronized demand focused on renewables and, with commodity supply-side spending outside of renewables still at very low levels, this demand growth should keep markets tight for the foreseeable future.
BlackRock expects copper to hit new all-time highs in the upswing of the cycle it said in a note on 18 December.
China’s relative success at containing its China Virus and optimism about global economic growth in Y 2021 as vaccines are rolled out is driving gains across industrial commodities from Iron Ore to Crude Oil.
We are seeing a Key reversal in copper, which fell more than 50% from a record high in Y 2011, trading below $5,000/tonne during a slump in Ys2015-16 and again early in Y 2021.
Copper benefits from more specific factors that make it attractive to long-term investors. As it is likely to benefit from the shift because of its use in electrical wiring.
In the near term, copper is getting a boost from tight supplies and strong demand.
Top consumer China took in record volume last month, pointing to resilient consumption as the country emerges from the virus chaos. Among signs of tightness, stockpiles tracked by Top exchanges including the LME have slumped to 6-yr lows
There is a bright outlook for consumption outside China. US lawmakers are finalizing a spending deal, and the Fed this wk strengthened its commitment to supporting the world’s largest economy.
Citigroup (NYSE:C) analysts warned that the Red metal was “too hot to handle” following a recent rally, and that prices may retrace if gains are not supported by the physical market.
Investors are already currently pricing in the broader, deeper and stronger Y 2021 economic recovery. This increases the risk that prices could struggle to hold such gains later in Y 2021.
On the technical side, LME copper 14-Day relative-strength index was at 77 Friday and has largely remained in overbought territory for 3 wks, even as prices continued to rise.
Have a healthy weekend, Keep the Faith!