The London Metal Exchange (LME) index of prices touched 2,049 in January 2016, its lowest reading since the dark days of January 2009, when the world seemed to be spiraling into full-blown depression.China came to the rescue then and it came to the rescue again last year, Beijing policymakers once again pumping money down the twin metals-intensive channels of infrastructure and construction to reinvigorate economic growth.
The LME index has since recovered to 2,768. True, performance has been mixed, largely reflecting each individual metal’s supply dynamics.But the worst seems to be over for base metals prices, with more upside to come. That, at least, is what fund managers are betting on.
There was some marginal reduction in fund positions over the course of December but the money men appear to be largely keeping the faith with the broader turnaround story.
Copper has long been the hedge funds’ favorite base metal to the point that somewhere in the mists of time someone awarded it an honorary doctorate for what it can supposedly say about the state of global manufacturing.Five years of falling prices, however, saw “Dr Copper” fall out of favor.
All that changed in November last year, when the copper price broke up out of its previous trading range in spectacular style.Fund money poured into the market, feeding on and accelerating the upwards momentum.
Net fund long positioning on the LME and the COMEX contract in the United States rocketed to previously unknown heights.And although some of that froth has been blown off over the last couple of weeks, net money manager positioning at 70,547 contracts on COMEX and 68,938 contracts on the LME is still at unprecedented levels.
Taking the COMEX contract as an example because the U.S. Commitments of Traders Report (COTR) has a much longer history, the previous high for net fund commitment on the long side was 48,994 contracts, a peak seen in July 2014.Particularly telling, moreover, is a comparison with 2009, a year of dramatic bust to boom. Funds bought into copper’s rally from a December 2008 low of $2,817 to a December 2009 high of $7,167 but the collective net long peaked just shy of 30,000 contracts.
The inference is that the amount of money available for investment in the copper market has increased exponentially over the same period.Judging by the greater volatility of positioning in recent years, that money has become a lot more active in terms of switching between long and short positioning as well.
The more statistically curious might want to draw a comparison in the graphic above between the COMEX and LME positioning reports.The two use the same methodology. Indeed, the LME based its own Commitments of Traders Report, launched in July 2014, on the U.S. template.
But the LME report seems to be weighted towards the long side given how infrequently net positioning has fallen into short territory.That should serve as a caveat when considering fund positioning in the other base metals because the LME’s report is all we have.
Visit - https://www.goldcruderesearch.com/comex.php
The LME index has since recovered to 2,768. True, performance has been mixed, largely reflecting each individual metal’s supply dynamics.But the worst seems to be over for base metals prices, with more upside to come. That, at least, is what fund managers are betting on.
There was some marginal reduction in fund positions over the course of December but the money men appear to be largely keeping the faith with the broader turnaround story.
Copper has long been the hedge funds’ favorite base metal to the point that somewhere in the mists of time someone awarded it an honorary doctorate for what it can supposedly say about the state of global manufacturing.Five years of falling prices, however, saw “Dr Copper” fall out of favor.
All that changed in November last year, when the copper price broke up out of its previous trading range in spectacular style.Fund money poured into the market, feeding on and accelerating the upwards momentum.
Net fund long positioning on the LME and the COMEX contract in the United States rocketed to previously unknown heights.And although some of that froth has been blown off over the last couple of weeks, net money manager positioning at 70,547 contracts on COMEX and 68,938 contracts on the LME is still at unprecedented levels.
Taking the COMEX contract as an example because the U.S. Commitments of Traders Report (COTR) has a much longer history, the previous high for net fund commitment on the long side was 48,994 contracts, a peak seen in July 2014.Particularly telling, moreover, is a comparison with 2009, a year of dramatic bust to boom. Funds bought into copper’s rally from a December 2008 low of $2,817 to a December 2009 high of $7,167 but the collective net long peaked just shy of 30,000 contracts.
The inference is that the amount of money available for investment in the copper market has increased exponentially over the same period.Judging by the greater volatility of positioning in recent years, that money has become a lot more active in terms of switching between long and short positioning as well.
The more statistically curious might want to draw a comparison in the graphic above between the COMEX and LME positioning reports.The two use the same methodology. Indeed, the LME based its own Commitments of Traders Report, launched in July 2014, on the U.S. template.
But the LME report seems to be weighted towards the long side given how infrequently net positioning has fallen into short territory.That should serve as a caveat when considering fund positioning in the other base metals because the LME’s report is all we have.
Visit - https://www.goldcruderesearch.com/comex.php
No comments:
Post a Comment