Gold Drops to $1,200/oz for First Time Since June in New York
Copper Seen Extending Rally With China Accelerating: Commodities
Copper traders are bullish for a third consecutive week as the fastest expansion in Chinese manufacturing in two years boosts confidence that the biggest buyer of the metal is leading a global recovery.
Eleven analysts surveyed by Bloomberg expect prices to rise next week, six were bearish and a further five were neutral. ETF Securities Ltd. said $28 million went into its ETFS Physical Copper exchange-traded product last week, the most since its introduction in 2010.
About $5.8 trillion was added to the value of global equities since November as China accelerated for the first time in two years and central banks from the U.S. to Japan pledged more action to bolster growth. The U.S. is in its best shape for two years, a global poll of Bloomberg subscribers on Jan. 17 showed. China consumes 42 percent of the world’s copper and North America 11 percent, Barclays Plc estimates.
“Copper is one of those metals that people feel is linked to the industrial cycle,” said Carole Ferguson, an analyst at SP Angel Corporate Finance LLP, a broker and adviser in London. “Demand is obviously returning, we’ve had good numbers coming out of China and the U.S. definitely looks as if it’s in a recovery trend.”
The metal rose 1.3 percent to $8,031.50 a metric ton on the London Metal Exchange this year, after averaging $7,953 in 2012, the second-highest on record. It reached a two-month low of $7,506 on Nov. 9. The Standard & Poor’s GSCI gauge of 24 commodities added 2.5 percent this year and the MSCI All-Country World Index (MXWD) of equities gained 4.4 percent. Treasuries lost 0.4 percent, a Bank of America Corp. index shows.
The preliminary reading of a Purchasing Managers’ Index in China was 51.9 percent this month, compared with 51.5 in December, HSBC Holdings Plc and Markit Economics said yesterday. The economy grew 7.9 percent in the fourth quarter after slowing in the previous seven periods, government data showed Jan. 18. Expansion will accelerate in this and the next two quarters, according to as many as 43 economists surveyed by Bloomberg.
The U.S. economy picked up across much of the country last month, the Federal Reserve said Jan. 16, as homebuilding jumped to a four-year high in December. A majority of the 921 people surveyed in the Bloomberg Global Poll Jan. 17 described the world’s biggest economy as improving.
Confidence in a recovery in the U.S. and China spurred investors to add $175 million to copper ETPs during the past nine weeks, ETF Securities said Jan. 22. Industrial users including AmRod Corp. and Southwire Co. have urged U.S. regulators to reverse a decision clearing the way for a JPMorgan Chase & Co. copper-backed product, saying such funds would leave less for manufacturers and create shortages.
Hedge funds and other speculators held a net-long position, or bets on higher prices, of 16,168 futures and options in the week to Jan. 15, U.S. Commodity Futures Trading Commission data show. While they cut bets by 20 percent from a week earlier, they’re still more than twice as bullish as the average over the past five years.
The Fed, European Central Bank and Bank of Japan are among nations that have pledged more stimulus amid concern the recovery will stall. The Washington-based International Monetary Fund cut its global growth forecast for this year to 3.5 percent on Jan. 23, compared with an October projection of 3.6 percent. The 17-nation euro area will contract 0.2 percent, it said. Europe accounts for 18 percent of copper demand, Barclays says.
There are already signs of slowing consumption. Stockpiles in warehouses monitored by the LME, the largest metals bourse, jumped 63 percent since reaching an almost four-year low on Oct. 16, exchange data show. Orders to withdraw metal slumped 43 percent in the past three weeks. China’s refined-copper imports slid 41 percent last year, customs data show.
Codelco, the biggest copper producer, will boost supplies and add to a surplus that may push prices down toward the end of the year, Thomas Keller, chief executive officer of Chile’s state-owned company, said Jan. 23 in an interview from Davos, Switzerland. This year’s glut may almost double to 128,000 tons as output rises faster than consumption, Barclays estimates.
Most of that surplus won’t come until the final three months of the year, with a 276,000-ton shortage expected in the two quarters through September, according to Barclays. Prices will climb to $9,000 in six months, Goldman Sachs Group Inc. wrote in a report two days ago.
In other commodities, five of 11 people surveyed expect raw sugar to gain next week and four predicted a drop. The commodity slid 5.9 percent to 18.36 cents a pound on ICE Futures U.S. in New York this year.
Fourteen of 29 people surveyed anticipate higher corn prices next week and 13 said the grain will drop, while 14 of 29 said soybeans will climb and the same amount expect lower prices. Thirteen of 28 traders predicted gains in wheat and 11 were bearish. Corn rose 3.3 percent to $7.2125 a bushel in Chicago this year as soybeans added 2 percent to $14.3675 a bushel. Wheat slipped 0.5 percent to $7.7425 a bushel.
Sixteen of 31 traders and analysts surveyed said gold would advance next week and 11 were bearish. Bullion fell 0.9 percent to $1,659.80 an ounce in London this year after advancing the previous 12 years, the longest run of gains in at least nine decades.
The S&P GSCI gauge of raw materials reached a three-month high this week and speculators raised bullish wagers across 18 commodities by the most since November in the week ended Jan. 15, CFTC data show. Demand will outstrip supply this year in platinum, palladium and tin, while corn, wheat and cocoa will have shortages in the 2012-13 season, according to estimates from Barclays and Rabobank International.
“It is an overall improvement in sentiment and a more constructive view on the global economy,” said Georgette Boele, a commodities strategist at ABN Amro Group NV in Amsterdam. “We favor the cyclical commodities with tighter supply and demand balances.”
Gold survey results: Bullish: 16 Bearish: 11 Hold: 4 Copper survey results: Bullish: 11 Bearish: 6 Hold: 5 Corn survey results: Bullish: 14 Bearish: 13 Hold: 2 Soybean survey results: Bullish: 14 Bearish: 14 Hold: 1 Wheat survey results: Bullish: 13 Bearish: 11 Hold: 4 Raw sugar survey results: Bullish: 5 Bearish: 4 Hold: 2 White sugar survey results: Bullish: 4 Bearish: 3 Hold: 4 White sugar premium results: Widen: 4 Narrow: 1 Neutral: 6
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