Why the Meltdown in Copper Prices this Week is Very Important for Precious Metals, and Equities Markets...

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The technical breakdown in Comex copper futures this week is not only an ominous clue for the red metal, but it's also a bearish signal for the entire raw commodity sector. December Comex copper futures prices this week dropped sharply and hit a three-month low. A bearish downside technical "breakout" occurred on the daily chart for the copper futures market, to suggest still more downside price pressure in the near term.

See on the monthly continuation chart for nearby Comex copper futures that prices have been trending lower for nearly three years and are on the verge of a downside breakout below key longer-term chart support at the $3.00 level.

Copper is a critical industrial metal used in construction worldwide. The fact copper prices dropped sharply this week is an early warning signal that construction activity worldwide could be flagging.
Indeed, history also shows copper market price moves can lead similar moves in the U.S. stock indexes. Along with the recent solid price downtrend in Nymex crude oil futures, the copper market meltdown this week suggests the raw commodity sector, in general, remains firmly controlled by the bears.

Importantly, the price action in copper and crude oil recently also corroborates the growing worries of worldwide deflationary price pressures.

Veteran commodity market watchers know that deflation is the archenemy of commodity markets.

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News Source: www.marketwatch.com

China "Offers Sturdy Floor" in Gold, But US Fed Meeting "Risks Downside"

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PRECIOUS METALS held in a tight range in London on Tuesday morning, moving sideways as world stock markets rose and commodities slipped ahead of the US Federal Reserve meeting, which begins today.

"No outstanding features, volumes fairly light and very little to report,"says broker Marex Spectron.

After telegraphing its intention to start reducing the $85 billion in monthly quantitative easing as soon as September, the Fed will announce its latest policy on Wednesday, soon after the release of official US data for second-quarter GDP.

Gold moved on Tuesday morning barely $4 per ounce above $1322 – the "crash"low of mid-April.

Silver moved just 0.7% around $19.70 per ounce.

"We could see some downside open up," says Standard Bank's commodities team, "if the Fed announces tomorrow that it will stay the tapering course."

Looking at recent bullion price action, "Gold is pushing hard" says technical analysis from Commerzbank "into the 2-month downtrend and the 55-day moving average at $1333/40."

Gold bullion and futures prices "reacted violently in June" Federal Reserve comments on policy, says a note from Bank of America-Merrill Lynch. But now "near-dated gold volatility has been falling in recent weeks.

"After the initial Fed fears lifted 10-year US Treasury rates from 1.6% to 2.7% in just a few weeks, rates seem to have stabilized in a 2.5% to 2.6% range, contributing to a drop in gold vols."

This "normalization" says BAML is now being reflected in gold futures prices. August futures settled Monday below further-dated contracts, confirming what the bank calls gold's "typically contango structure" – whereby prices are higher for delivery further into the future.

But "we are moving closer and closer to tapering,"reckons Tom Tucci, head of Treasury trading at CIBC World Markets, currently with $12bn in assets under management, speaking to Bloomberg.

"With no new news, the risk right now is for higher rates, not lower,"says Tucci, saying 10-year Treasuries should yield around 2.75% "given the state of the economy and the Fed's stance."

The quantity of gold bullion held to back investors' shares in exchange-traded trusts funds was unchanged Monday, remaining 25% lower from the start of 2013 at four-year lows.

Emerging-market central banks "disappointed gold bulls" with their bullion purchases in June, says a note from Swiss investment bank and London market-maker Credit Suisse.

"Reserve asset managers are as unwilling to 'catch a falling knife' as any other fund manager we think," says the note, "and in general are wary of spikes in volatility."

But in China – now the world's second-largest economy, and likely to overtake India as world No.1 gold consumer in 2013 – private household demand for gold bullion"does hold the promise of a sturdy price floor" says a note from fellow Swiss investment bank and London market-maker UBS.

Moreover, "In China banks are setting up and/or growing gold accumulation plans offered to the public. Better and easier access to gold via banks' growing networks combined with strong appetite from retail customers have driven the tremendous appetite from China this year."

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News Source: www.bloomberg.com 

Gold Prices Still Responding To Fed Stimulus...

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Precious metals diverged this morning with gold climbing by $5.25 to trade at 1339.95, and silver has declined by 17 cents to trade at 20.275.  Gold futures declined on profit-booking, marking their first decline in 4-sessions just after the metal’s biggest one-day price gain in more than a year. Prices mostly traded in a range, as investors weighed the US Federal Reserve’s next move on monetary stimulus against the prospects for demand amid higher prices.

A report in Bloomberg yesterday, said that they are expecting the Fed to reduce its monthly asset purchases in September to 68 billion from the current 85 billion. Gold has recovered about $150 from a three-year low of $1,180.71 an ounce hit on June 28, after the US Federal Reserve said it would only start phasing out its stimulus once it was sure the economy was strong enough to stand on its own. This allayed fears of imminent cuts to the Federal Reserve’s monthly bond purchases, which is tantamount to printing money and supports gold’s appeal as a hedge against inflation.

The dollar traded lower against the euro and pared gains against the yen in a thin volume trade on Tuesday, as investors adjusted positions with technical levels in the absence of any economic data to drive direction. The combined government debt of 17-euro zone nations rose to 92.2% of gross domestic product, the highest in its history – in the first quarter of 2013, despite stringent austerity measures deployed in the region since the beginning of the financial crisis.

The base metals complex traded on a positive note as a result of a rise in risk appetite in the global market sentiments. Further, weakness in the US dollar acted as a positive factor for prices.
However, sharp upside in prices was capped on the back of LME inventories scenario and compounded by the scandal in inventory prices and Goldman. The Federal Reserve faces new pressure to explain why it lets banks trade raw materials and control supplies after congressional witnesses said regulators can’t really grasp what lenders are doing in industrial businesses.

Copper prices traded on a positive note in the yesterday’s trade increased around 0.5 percent on the back of decline in LME copper inventories around 0.4 percent which stood at 632050 tons.  Further, weakness in the DX coupled with upbeat global markets supported an upside in prices.


Traders can expect the base metals group to trade on the back of weak global markets. Further, strength in the DX will act as a negative factor. Additionally, a decline in China’s manufacturing data which is at 11-month low will exert downside pressure in prices. However, a sharp downside in prices will be cushioned or reversal can be seen on account of expectations of favorable manufacturing and services PMI data from the eurozone. Markets are expecting to see a climb towards 50 for eurozone PMI’s a miss could see some volatility in the marketplace.

Contact Us:

Asad Rasheed
Direct:04-3841906
Email:asad@cfb.ae
Email:info@cfb.ae

For more information please visit our website century financial brokers.

Here are some useful links that you can follow:

Here is a CFB blog that gives useful daily Gold Analysis on dailybasis.

You can also follow CFB on facebook (useful advice on posts regularly)

Here is another blog that provides regular news and information and is very useful for Forex Signals.

News Source: www.reuters.com