Outlook and Recommendation Copper remains weak as global consumption falls and the dollar strengthens. Copper moved into December trading at 2.056. Copper
Copper remains weak as global consumption falls and the dollar strengthens. Copper moved into December trading at 2.056. Copper lost over 11% in November. Metals prices have rallied off six-year lows this week on hopes that Chinese producers will cut output in the face of low prices. Moreover, Bloomberg reported this week that Chinese authorities are weighing state purchases to support prices near the lowest in years. Bloomberg also reports that Chinese regulators are also considering a request from the association to probe short-selling in metals.
According to Bloomberg and the Financial Times, Chinese nickel producers are expected to meet this week to decide upon output cuts, after a group of 10 zinc smelters last week announced they would cut production while the China Nonferrous Metals Industry Association has reportedly asked China’s National Development and Reform Commission to buy up stocks of excess metal.
But if history’s anything to go by, a decision to buy up excess stocks of nickel, copper, aluminum and zinc will only end in disaster for the metals markets.
In a note to clients, Goldman Sachs summed up the argument for/against state intervention nicely:
“State Reserve Bureau buying of metals and/or government investigations of short positioning, would in our view at best temporarily support metals prices, potentially providing a selling/producer hedging opportunity over the coming month. Indeed, ultimately, to the extent these measures are implemented in order to support jobs, this supports Chinese metals output, which is ultimately bearish for prices.
An investigation of market short positions could result in a short covering related rally, however this would not change the underlying bearish fundamentals which in our view predicated the positions in the first place.”
The last time China’s State Reserve Bureau tried to intervene in the metals markets was back during the global financial crisis when the SRB stepped in to purchase copper after the price of the metal collapsed. SRB buying sent the price of copper to an all-time high during 2011 but ignited a gold rush (or copper rush) among producers. During the first seven months of 2015, the global copper market had a surplus of 8,000 tonnes compared with a deficit of 563,000 tonnes in the same period a year earlier. LME copper stocks are still up 60% this year, and it’s estimated that approximately 20% of copper output is loss-making because producers expect prices to bounce and are unwilling to cut output, preferring instead to cut costs.
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.
Major Economic Events That Will Affect The Markets In December
Cur. |
Event |
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Tuesday, December 1, 2015 |
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CNY |
Manufacturing PMI (Nov) |
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CNY |
Caixin Manufacturing PMI (Nov) |
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AUD |
Interest Rate Decision (Dec) |
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AUD |
RBA Rate Statement |
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EUR |
German Manufacturing PMI |
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EUR |
German Unemployment Change |
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GBP |
BoE Gov. Carney Speaks |
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GBP |
Manufacturing PMI (Nov) |
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USD |
ISM Manufacturing PMI (Nov) |
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Wednesday, December 2, 2015 |
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AUD |
GDP (QoQ) (Q3) |
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GBP |
Construction PMI (Nov) |
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EUR |
CPI (YoY) (Nov) |
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USD |
ADP Nonfarm |
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USD |
Fed Chair Yellen Speaks |
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Thursday, December 3, 2015 |
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GBP |
Services PMI (Nov) |
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EUR |
Interest Rate Decision |
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EUR |
ECB Press Conference |
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USD |
Yellen Testifies |
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Friday, December 4, 2015 |
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AUD |
Retail Sales (MoM) (Oct) |
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USD |
Nonfarm Payrolls (Nov) |
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USD |
Unemployment Rate |
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EUR |
ECB President Draghi |
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Tuesday, December 8, 2015 |
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CNY |
Trade Balance (Nov) |
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GBP |
Manufacturing Product |
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Wednesday, December 9, 2015 |
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CNY |
CPI (YoY) (Nov) |
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NZD |
Interest Rate Decision |
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Thursday, December 10, 2015 |
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AUD |
Employment Change |
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GBP |
Interest Rate Decision |
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Friday, December 11, 2015 |
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USD |
Core Retail Sales (MoM) |
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USD |
PPI (MoM) (Nov) |
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USD |
Retail Sales (MoM) (Nov) |
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Saturday, December 12, 2015 |
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CNY |
Industrial Production |
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Sunday, December 13, 2015 |
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JPY |
Tankan Large |
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JPY |
Tankan Large Non- |
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Tuesday, December 15, 2015 |
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GBP |
CPI (YoY) (Nov) |
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EUR |
German ZEW Economic |
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Wednesday, December 16, 2015 |
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EUR |
German Manufacturing |
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GBP |
Claimant Count Change |
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EUR |
CPI (YoY) (Nov) |
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USD |
Fed Interest Rate |
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NZD |
GDP (QoQ) (Q3) |
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Thursday, December 17, 2015 |
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EUR |
German Ifo Business |
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GBP |
Retail Sales (MoM) (Nov) |
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Thursday, December 24, 2015 |
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All Day |
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Holiday |
Germany – Christmas Eve |
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Holiday |
United States – Christmas Eve – Early close at 13:30 |
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