From the July 01, 2012 issue of Futures Magazine • Subscribe!

Copper market dulls

Hot commodities

The near future appears less than bright for copper, whose prices have suffered amidst declining manufacturing and global economic woes.

Keith Springer, president of Springer Financial Group,  says that copper prices have experienced “a massive slowdown” in recent months, an indication that manufacturing also will decrease six to nine months out. According to Springer, the explanation for the downward trend is simple: “We’re in a worldwide recession.” He anticipates the copper market will continue to struggle for the foreseeable future, putting support at around $275 and resistance at $345.

Travis Rodock, senior futures analyst at efutures, also points to the slowing global economy as a major factor in falling copper prices, which have declined more than 18 percent from the April highs to the June lows. He says the European sovereign debt crisis has combined with a shrinking factory sector in the U.S. and China to create “an environment of high-risk aversions.”

Like Springer, Rodock expects the current downward trend to continue. “We are kind of approaching this record short spec positioning in copper right now,” he says. “I think the market’s a bit oversold.”

“One thing that could help stem the slide is if we did see some coordinated action by the central banks of the world, or even some more monetary stimulus from China or U.S. Federal Reserve,” Rodock says. He is not optimistic about the likelihood of such action, though, noting that the Fed’s recent extension of Operation Twist disappointed some market participants looking for stronger measures.

Rodock currently puts the June low at $320-$380. “I’m still leaning toward the downside $320-$340 and down,” he says.

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