Copper Breakout vs Gold | ETG:CA Message Board Posts


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Msg  14822 of 15077  at  10/18/2021 9:21:57 PM  by

countrygent


 In response to msg 14821 by  minerdude
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Re: Copper Breakout vs Gold


Miner, I find physical markets that are overlayed by huge trading markets and options fascinating and bewildering. Supposedly the contracts that trade are huge multiples greater than actual physical demand and supply, of course they all cancel each other out, except ... when there is a strong interim market sentiment both sides of the physical trade can become hoarders - producers hold back inventory in their own yards as they see better prices coming; buyers stock their yards for fear they will run out of supply and to hedge against price rises.

So it is very difficult to know how elastic these low LME levels are because it could well be that inventories in producer and consumer warehouses off the market in fact exceed the usual LME inventory. Actual demand and supply wont reveal itself for a while. Not to say the sentiment right now doesnt seem to be clearly tighter supply and higher prices - but robust inventories may drive down demand side price pressure regardless of LME inventories ... we have to wIt and see. It was very interesting when it was suggested the Chineses had a crack at attacking contract and option longs driving up prices by releasing significant Shanghai warehouse stocks a few weeks back - either to backfill legitimate shortages or just to knock back prices and keep longs at bay.

The chart sure looks promising, and the story, the energy technology rollover demand story, could sure keep the pot boiling for a while yet. But there is a limit where price will stifle demand - I think back to the run oil had up to $120/bbl back around 2006(?) which started to crush economic growth, but also encouraged huge investment in unconventional deposits and fracking ... and within 15 years we saw the bizarro extreme of negative pricing for a few weeks last year when Covid shutdowns made a glut that exceeded storage.

Very interesting!

c gee whiz


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