Commodities outlook: BHP dents copper progress
All eyes are on US monetary policy after a subdued week for key commodities, including copper and gold.
21st August 2019 14:09
by Rajan Dhall from interactive investor
All eyes are on US monetary policy after a subdued week for key commodities, including copper and gold.
Commodities have had another interesting week as copper struggles to move higher and gold clings on to the $1,500 per ounce handle.
In terms of the copper price, this week's annual results from BHP (LSE:BHP) pushed sentiment lower as the mining giant warned that iron ore prices would likely be lower next year.
They also noted supply disruptions would continue to be volatile after the dam disaster in Brazil. It seems BHP are not the only ones who are worried about demand as miners in Chile also reduced guidance. Chilean Copper Commission (COCHILCO) also dropped its 2020 projection from $3.08 to $2.90 per pound.
As we can see from the weekly copper futures chart below, prices on the Comex exchange are still under pressure. After the long term trendline was breached a couple of weeks ago the market then came back and tested it again before a move lower.
It now seems that the $2.50 per pound support level is the target. Any good news from the China and US trade talks could reverse this weakness so keep an eye on the headlines. Elsewhere we could see some USD weakness as we head into key risk events, including the Jackson Hole symposium.
Source: TradingView Past performance is not a guide to future performance
The gold price, meanwhile, has not changed much over the past week.
Risk sentiment is still fragile but as stocks fall gold has failed to break the resistance level marked on the chart ($1,523 per ounce).
The market is clearly waiting for another catalyst for a move higher and it could be a potential dovish shift from Federal Reserve chairman Jerome Powell at the Jackson Hole symposium.
Powell has come under even more pressure from US President Trump who recently stated that he thinks the Fed should cut rates by 100bps and kickstart QE again. As other central banks around the world loosen monetary policy the President does not feel the Fed is keeping up with the race to the bottom.
Having said that he has put the FOMC members between a rock and a hard place as any move now will put their independence into question.
Source: TradingView Past performance is not a guide to future performance
Rajan Dhall is a freelance contributor and not a direct employee of interactive investor.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.