Copper market oscillation pattern will continue

The domestic tightening policy, the smoke in the Middle East and North Africa, the economic catastrophe caused by the natural disasters in Japan, and the repeated and repeated European sovereign debt crisis have hit the copper prices at different levels. The recent “Goldman Warning” turned out to add yet another bottleneck to the already unsteady market. Together with the international rating agency Standard & Poor’s announced on Monday this week, the outlook for the US Aaa credit rating has been lowered from “stable” to “negative”. , so that the market suffers from the cold and under pressure. At the same time, the support of the European interest rate hike to the euro and the monetary policy of the United States to continue to maintain quantitative easing will still support the copper price to a certain extent. On the demand side, China’s increased expectations for copper consumption also limit the fall in copper prices. Therefore, with these intricate and complex relationships, the pattern of copper prices operating in a wide space will not change in the short term.

For a long time, Goldman Sachs has been a strong backer of crude oil bullish. However, on April 11th, Goldman Sachs suddenly advised its clients that it would take profits as soon as possible before the reversal of crude oil and other market trends. This proposal seems simple, but in a short period of time let the NYMEX crude oil contract price fell nearly 6% within 48 hours, the market is mainly worried that he will become the final buyer, quickly. For copper prices, Goldman Sachs believes that the target price of $11,000/t will be achieved in the second quarter of 2012, while the target price for the end of 2011 will be lowered from $11,000/t to $9,800/t. At the same time, it is also proposed to close the long position of the December 2011 copper contract. As a result, the price of copper was also significantly reduced by the pressure from closing the market, recording the largest weekly drop in the market since mid-March.

The sudden change in attitude of the Goldman Sachs Group has caused the panic in the market to increase rapidly. In the short term, the market can make a huge reflection and can see its great influence. But calm down, we found that the sudden change of attitude of Goldman Sachs has hidden mystery. Goldman Sachs used the report effect to reduce the extent of crude oil short position losses, which led to a substantial fall in commodities including copper prices, and the market turmoil was even more severe.

As far as the Chinese market is concerned, the pace of regulation and control is gradually accelerating as inflation continues to rise. On Sunday, the central bank decided to raise the deposit reserve ratio of deposit-taking financial institutions by 0.5% from April 21, 2011. After raising the deposit reserve ratio this time, the reserve ratio of large banks was as high as 20.5%, setting a new record high. Although it is still unknown how to use the means of raising interest rates to cope with inflation, for the price of copper, the tightening of liquidity cannot be underestimated.

Compared to the domestic tightening policy, the U.S. monetary policy is still at a loose level. The weakness of the US dollar is unlikely to change in the short term. Coupled with the fact that Europe raises interest rates in the face of high inflation, it has led to more active interest rate spreads around the globe, which further hit the dollar. Therefore, the long-term weakness of the US dollar will continue to support the copper market.

Although the Chinese government's measures to reduce liquidity have made the market liquidity appear tense, but in this traditional consumption season, as the world's largest copper consumer country, its growth in consumption of copper is still obvious to all. According to data released by the National Bureau of Statistics of China on April 15, China’s refined copper production in March was 470,000 tons, an increase of 23.7% year-on-year, and an increase of 21.8% from the previous month; in March, China’s imports of unwrought copper and copper increased by 29.2% to 304,299t. . These data indicate that the arrival of the peak season in consumer spending has caused China's demand for copper to increase, and the increase in consumer expectations will also lay the foundation for the copper bull market pattern.

Uncertainty in the direction of the global economy has always kept the market turbulent, and the “Goldman Sachs warned” that the blow to the market will also be accompanied by a drop in the price of oil and a loss that will gradually reduce the power of the downside. While the global liquidity is still abundant, it will provide support for copper prices. Therefore, in the short term, the repeated pattern of copper market is difficult to change under the pressure and support.