Copper

They call it "Doctor Copper" because copper pricing is a pretty good indicator of economic health. It's more of a demand metal than gold or silver and hard to fake and there aren't any silly ETFs stockpiling it although China has socked away a full-year's supply, which has given copper a very false sense of demand...

“Dr. Copper”, the only commodity with a PhD in economics, is predicting a decent economic recovery. While demand for American home construction remains in the basement, demand from China is surging, whose own construction industry remains on a tear. Global production has fallen 12% during the first half of this year. The new “monetization” of the red metal. Stashing copper bars in warehouses around the country, expecting the red metal to hit $6/pound within the next three years. (JJC), (DBB), (ECH), (FCX).

The decline of China copper imports in recent months has caused a lot of distress among traders. Much of the focus has been on copper's eventual crash by China's property chock. However, China's property market is not the only game in copper town.

Goldman's Allison Nathan is out tonight with a report that will leave an unpleasant taste in the mouths of growth/BRIC bulls. In an analysis whose key catalyst is a downward revision of demand growth expectations, Goldman materially cuts its short and mid-term forecast prices for key commodities oil and copper. "Commodity markets are generally rebounding strongly off their lows but sentiment remains fragile on European and Chinese concerns and potential signs of slowing positive economic momentum, despite generally healthy macro data and further improvements in commodity fundamentals. These concerns have caused the market to revise down expectations for future growth, and, in turn, discount future commodity supply constraints." Specifically, Goldman has revised its 3 Month oil forecast to $87 from $96 (old forecast can be found here), nat gas unchanged, copper to $6,800 from $8,125, and zinc to $2,000 from $2,600. What is most amusing is the sheer loathing that comes of the page in which Nathan is forced to be constructive on gold. "We see upside risk to our forecast should investor demand continue to support further flows into the gold-ETFs or central banks continue to accumulate gold. For example, if gold-ETF buying were to continue at its current pace for the remainder of the year, we would expect gold prices to rise to $1,400/toz by the end of 2010."

Copper and crude oil are both base essentials heavily reliant upon by economies globally for everyday usage, with no meaningful substitution options. Gold, on the other hand, is not as essential to keep the everyday world running seamlessly, and could conceivably be substituted by other commodities with a change in global monetary standard or people’s perception. From that perspective, I think there are a few recent trends pertaining to crude and copper that are being misinterpreted.

First, Goldman royally raped its clients by losing them a boatload in two sequentially failed EURUSD recommendations (on which the firm, of course, being on the other side of the trade, ended up making a killing). Today the firm is handing out vaseline to clients but not in FX - they are now going after commodities and, specifically, gold. Most relevantly, Goldman is once again starting to accumulate Gold. Three months ago Goldman boosted its forecast price target to $1265/toz in 2010 and $1425/toz in 2011, during which period the firms was likely shorting gold to clients who were buying in expectation of a price hike. Today Goldman has revised its call - no surprise: gold is now expected to drop to $1165 in 2010 and $1350 in 2011. Then again, according to former Goldmanite and current gold "expert" Jeff Christian big banks would never do something as risky and foolish as having a naked short position. So please ignore anything we might have said earlier about GS shorting gold unhedged. Bottom line, clients are now expected to sell their gold to Goldman. Which means Goldman is buying. You do the math.

The earthquake in Chile last night caused a spike in Copper, as the country is one of the top producers of the metal. As more information is released about the conditions in Chile, the market corrected and posted a quite bearish candle on the day (see dail copper chart). If we gapped down below 331 tomorrow we would basically have an island reversal on the recent highs and on the back of a failed retest so far of the support of the former bullish channel now resistance. We think this presents technically a possibly very good shorting opportunity. - Nic Lenoir

Despite its red hot streak in 2009, copper's continuous rally in the face of swelling inventories, a sign of weak consumption, has perplexed many in the market. Some even say copper is behaving more like gold rather than strictly a base metal. Could copper be the new precious metal?

Broad capital spending cuts, and curtailed production have landed machinery companies in the pits but mining equipment makers will likely be among the first to emerge from under the recessionary rubble. The reason is that commodity prices are up substantially from their recent lows, at a time when the world is running out of all those precious natural resources.

Well, this just gets deeper and deeper. Before we proceed with the rest of the article, it's important to note that there currently isn't really a significant amount of room for copper to fall. However, as we dig through the details an inconsistent picture emerges.

Well, this just gets deeper and deeper. Before we proceed with the rest of the article, it's important to note that there currently isn't really a significant amount of room for copper to fall. However, as we dig through the details an inconsistent picture emerges.

Much has been made about the Chinese connection with regards to copper demand since our last piece on the subject. This piece indicates that Chinese are gearing up for a manufacturing and construction rebound as supplies fall, prices rise, and Chinese indicators are showing bullish signs that are increasingly rare - being first order positiver rather than second order.

Tyler and I are thinking of redoing the 4th floor at ZH headquarters and to figure out when to do it, we were looking at copper futures on COMX (which is what normal people do... right?)

Tyler and I are thinking of redoing the 4th floor at ZH headquarters and to figure out when to do it, we were looking at copper futures on COMX (which is what normal people do... right?)

Tyler and I are thinking of redoing the 4th floor at ZH headquarters and to figure out when to do it, we were looking at copper futures on COMX (which is what normal people do... right?)