Commodity Sentiment This Week: Metals

Copper, D1

Against a mixed macroeconomic backdrop, gold rose at the end of the week as demand for hedges increased. The increase in unemployment initially provided support by allaying concerns about the Fed’s intention to continue aggressively raising interest rates. However, with the failure of Silicon Valley Bank, investors rushed to protect assets. As bond prices rose and equity markets took a sharp decline, gold and silver benefited from a surge in investor interest. This helped offset losses earlier in the week following comments made by Powell, that the central bank is poised to accelerate the pace of tightening inflation and labor market strength. Contagion in the banking sector is likely to keep support for the precious metal strong.

The precious metal rallied sharply on Monday for a second session, with gold rising to a 5-week high and silver jumping to a 2-week high. Concerns about contagion risks from the collapse of Silicon Valley Bank and the closure of Signature Bank of New York have fueled safe-haven buying of the precious metal. Also, Monday’s sell-off in the dollar to a 3-week low is bullish for metal prices. Additionally, Monday’s decline in global bond yields supported the metal.

Meanwhile, amid concerns about China’s economic slowdown, copper saw the main drop in the base metals sector. Expectations of additional fiscal stimulus spending are shrinking as a result of China’s weak growth target. The losses were exacerbated by the risk-off mood surrounding the market and the hawkish statements from the Fed. However, increased spending on renewable energy will be accelerated with a focus on energy security. Due to the increasing demand for network infrastructure investment, this will increase the demand for commodities such as copper and aluminum.

Palladium prices also rose earlier this week, as the dollar weakened against most of its main rivals with markets assessing Fed policy. The market continues to rely on China for high commodity and mineral demand after the easing of Covid 19 restrictions. Palladium is trading around 1460.00 after rebounding to 1338.55 last week. Meanwhile Platinum is traded at the price range of 995.00, having strengthened more than +10% from the low price of 903.30.

Technical Review

Copper,D1 – Tends to trade within a range bound in ranging candle patterns that do not show a clear direction. Price is currently holding above its 200 day EMA (3,916), with the two technical indicators RSI and MACD flattening.

Copper- D1

Even though the price is moving above the 200-day exponential moving average and in an ascending channel, the bias remains neutral for the time being. Movement above 4,349 is still blocked by resistance at 4,231, while a break below 3,196 could have implications for this asset dropping to support 3,703 first. Overall copper is in an uptrend, but demand for the asset appears to be waning and needs momentum to fuel a continuation move.


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Ady Phangestu

Market Analyst – HF Educational Office – Indonesia


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