Copper Reverse Crush. Manic Metals Report 05/31/2024

Thank you everybody for checking out the new Manic Metals report.

By popular demand many of my clients have been clamoring for me to put together a report on metals and while I’ve been noted for my energy commentary for many years, I have a lot of experience on the metal side as well.  As a futures broker since 1983, I’ve had a lot of experience trading metals, physical as well as futures.

While I have written periodic pieces on the metals markets for certain publications over the years, I’ve never ventured into something on a more regular basis. Now with metals making record-breaking historic moves I think the time is now to help people stay more in touch with these incredible moves. Many of my readers on the energy side have become a community not only of clients but friends. We share information and ideas and I hope to build the same type of community and the metals world as well.

Besides many of my clients already crossover to the dark side and I will not tell you right away whether that’s on the metals or energy side. I’ll leave that to your imagination.

So, any Futures Trading on metals or the potential for deliveries, feel free to contact me and we’ll try to get you pointed in the right direction.

So, without further ado let’s get going on this Phil Flynn’s manic metals ride.

What better place to start than copper, the red metal that pulled back from a record high! Copper, or Dr. Copper as it was known used to be a sentiment for global economic growth but now it could be a symbol not only for the health of the global economy but the energy transition. Copper has made an incredible room due to a squeeze on inventories.

This week the copper squeeze play ending in ignominious fashion, but it may set up for coming attractions for late summer. Many copper traders know that from the demand side the final say on global copper demand has been China China and China.

The in the copper industry have seen a strategic shortage building in the copper market for years and while prices have been subdued because of uncertain conditions in China the reality of the situation is now too big to ignore.

Speculative long positions in the London Metal Exchange copper stocks were at nearly a decade high as deliverable stocks were short and there was a scramble to buy. Now that play helped Comex copper as well and reports of some scrambling for supply. Now that play has passed but the fundamental shortage has not gone away. Look to bid on calls on breaks or go long futures and hedge with a short call.

Gold and silver also have pulled back after a big surge to start the Memorial Day week obviously the market is heavily influenced by what the Fed may or may not do on interest rates. It’s still from a historic viewpoint silver is still way too cheap compared to the price of gold. One of the reasons for gold’s historic run this year has been the fact that central banks are buying gold like it’s going out of style.

Generational high inflation and the possibility of global conflict is causing a surge in buying.

The AP reported that “President Joe Biden has given Ukraine the go-ahead to use American weaponry to strike inside Russia for the limited purpose of defending Kharkiv, according to two U.S. officials familiar with the matter. The officials, who requested anonymity to discuss the sensitive matter, underscored that the U.S. policy calling on Ukraine not to use American-provide long-range missiles and other munitions to strike inside Russia offensively has not changed.

In fact, the World Gold council said that the total demand for gold rose 3% year over year in the first quarter of 2024 and the expectations are it’s going to continue to rise later this year.

In fact, back in the heydays of the gold rush in the 70s and 80s one of the reasons why people bought gold was because of concerns about inflation and concerns about the stability of the global economic system. In fact, gold recently has been paying a lot more attention to inflation and we’re seeing money flow back into gold as a traditional inflation hedge.

What competition from cryptocurrencies that many people are using as an inflation hedge gold is really regaining its financial asset status. India been a major buyer of gold and of course a major consumer of jewelry. There was some concern that high prices for gold in India will damper consumer demand. Consumer demand in China seems to be through the roof.

Infections to be a scramble as reports are saying that dealers in China are charging $20 to $25 per oz. above the global spot price. High prices took away a little bit of the momentum out of gold, but the expectations are if we get any break in price then the Indian people will flock back to gold as gold as their first choice for many of their celebrations.

Aluminum prices are continuing to soar, that’s also a shortage of then is becoming more prevalent. Zero Hedge wrote that “Aluminum prices in London reached their highest in two years as the industrial metals rebound theme continued, driven by a combination of supply constraints and the prospect of increased demand in China and the US.

The latest driver for the silvery-white, lightweight metal, used in everything from vehicles to aircraft to window frames to soda cans, comes as China, the world’s top producer, signaled overnight aggressive emission-cutting targets for smelters, in return, tighter metal capacity.

In a further boost for the bulls, China’s State Council pledged to strengthen capacity limits in industries from steel to alumina in a work plan for energy conservation and carbon reduction in 2024-25. The move to constrain additional supply comes at a time when the transition to greener energy is boosting demand for copper and aluminum.

The country will strictly control new capacity for copper smelters and alumina output, and take a reasonable approach in allocating fresh capacity for silicon, lithium and magnesium, the government said late Wednesday.

The government also reiterated strict implementation of the “aluminum swap scheme,” or the requirement for any new smelter to be matched by closure of an existing one. New capacity for aluminum, alumina, polysilicon and lithium batteries must meet advanced levels of energy efficiency, it added. -Bloomberg

Reuters reported this week that – Novelis, owned by Indian billionaire Kumar Mangalam Birla’s Hindalco Industries (HALC.NS), opens new tab, is targeting a valuation of up to $12.6 billion in its initial public offering in the United States, the aluminum products maker said on Tuesday.

The world’s largest recycler of aluminum, whose customers include Coca-Cola, Ford, Jaguar Landover, said its parent is looking to raise up to $945 million through the sale of 45 million shares at a price of $18 to $21 per share.

Make sure you sign up for special updates by emailing me at pflynn@pricegroup.com or by calling me at 888-264-5665 Also catch me on the Fox Business Network Invested in You.

 

Thanks,

 

Questions? Ask Phil Flynn today at 312-264-4364