Copper: Mixed Signals Have Investors Snoozing…

| October 29, 2014 | 0 Comments

shipping copperAs you may know, there has been plenty of volatility in the commodity market the past few months. Energy, precious metals, and grains have all experienced significant price swings since July.

But one commodity has been asleep…

… Copper.

The red metal has been trading in a relatively tight, range bound pattern for months on end.

Take a look…

Copper

In case you’re unaware, copper’s performance is highly dependent on China. Since China consumes approximately 40% of global production, investors tend to key trading decisions off the country’s incoming economic data.

But that hasn’t been easy to do lately…

Recent Chinese economic figures have investors scratching their heads. While some data shows the country’s economy remains strong, additional data points reveal certain sectors of the Chinese economy are the weakest they’ve been in years.

Let me explain…

Purchasing manager index data, merchandise trade balance, and industrial production numbers have all come in relatively strong this month. These inputs support the idea China’s economy is still robust.

But wait a second… 

Chinese new home sales are declining, foreign investment is contracting, and the country’s inflation reading is at its weakest level in years. These readings support the argument that China’s economy is in the midst of a major slowdown.

Which data paints a clearer picture?

It’s tough to say. But one thing’s for certain- the conflicting data has the copper market stuck in limbo. At this point, investors are content to let the red metal trade in a tight range just north of $3 a pound.

Is there anything capable of kicking copper to higher prices in the near future?

Possibly.

As you may have heard, the European Central Bank (ECB) is on the verge of a new bond buying program designed to stimulate the Eurozone. If the ECB is successful, we may see a resurgence in core European economies.

And since the European Union is one of China’s largest trade partners, a Eurozone rebound could catapult the Chinese economy back to higher ground. I admit it’s a stretch, but it really is the only thing bullish copper investors have going for them right now.

Bottom line…

At this point, copper investors have little to get excited about. As a result, we may see this market trade sideways until conflicting Chinese economic data is resolved.

Until Next Time,

Justin Bennett

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Category: Copper

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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