The amount of available copper stored in the London Metal Exchange’s (LME) warehouse system fell to 21,600 tonnes last week, the lowest level since 2005.
The year 2005 marked the start of an extraordinary six-year rally that was only briefly interrupted by the Global Financial Crisis. The copper price more than tripled over the period, topping out early 2011 at $10,190 per tonne.
What are super-low LME stocks telling us this time around? Is the world really running short of copper to the point there are just over 20,000 tonnes left in LME warehouses? The answer is clearly no.
There is plenty of copper in China and some of it may shortly be heading for the nearest LME warehouses. The squeeze on the LME copper contract probably has only a limited shelf life.
Several weeks ago I wrote about copper and suggested that it was about to break out, but it could be a sell the news scenario because above the resistance line sits not one, but two daily supply zones.
Well, there was no US-China deal as of yet, close as Trump said, which could be why copper did break out, but as the chart suggested, price hit the first supply zone and pull backed.
But in the process of price breakout, price formed a daily demand zone as well.
Thus, price is wedged between buyers and sellers and in the middle of what’s about to be war. I honestly have no clue where price is headed next, but I will be following the US dollar for clues as the US dollar and copper are inversely correlated.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.